If I am long 1000 shares and I think temporary pull back is coming, I want to have a starter short position of 200 shares. Instead of selling 1000, shorting 200, covering 200, buying back my original 1000 ... Isn't it more efficient to keep 1000, short 200 in a separate account and then cover 200?
Position=1000 A) sell 1200, buy 1200 => long 1000 (shares traded 2400) B) sell 200, buy 200 => long 1000 (shares traded 400)
Qlai, why don't you just try it in your real account, and see how it goes for you? There has to be an eventual point where you stop talking about it and just try it? Take the leap! Give it a whirl, and see how it goes! Because no matter of talk can convince you one way or the other! Try it small at first, and work it from there!
You never heard of this? A box position. I didn't read the whole thread, maybe its in here but since you just brought it up again, here ya go. Short Sell Against the Box Reviewed by Will Kenton Updated May 30, 2018 What is a Short Sell Against the Box A short sell against the box is the act of short selling securities that you already own. This results in a neutral position where your gains in a stock are equal to the losses. For example, if you own 100 shares of ABC and you tell your broker to sell short 100 shares of ABC, you conducted a short sale against the box. BREAKING DOWN Short Sell Against the Box A "short sell against the box" is also known as "shorting against the box." Sellers use this technique when they do not actually want to close out their position on a stock. The strategy is generally used by investors who believe the stock is due for a fall in price, but do not wish to sell because they believe the fall is temporary and the stock will rebound quickly. Restrictions The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) regulate when sellers are allowed to sell short. For instance, in February 2010, the SEC adopted the alternative uptick rule, which restricts short selling when a stock drops more than 10% in one day. In that situation, those engaging in a short sale (even if the shares are already owned) usually must open a margin account. An alternative strategy is buying a put option, which gives investors the right, but not the obligation, to sell the shares. Buying a put option has a per-share cost associated with it, which is comparable to a short sale transaction. Previous Motivation Prior to 1997, the main rationale for shorting against the box was to delay a taxable event. According to tax laws that preceded that year, owning both long and short positions in a stock meant that any papers gains from the long position would be removed temporarily due to the offsetting short position. The net effect of both positions was zero, meaning that no taxes had to be paid. For example, say you have a big paper gain on shares of ABC. You think that ABC has reached its peak and you want to sell. However, there will be a tax on the capital gain. Perhaps the next year you expect to make a lot less money, putting you in a lower bracket. It is more beneficial to take the gain once you enter a lower tax bracket. However, the Taxpayer Relief Act of 1997 (TRA97) no longer allows short selling against the box as a valid tax deferral practice. Under TRA97, capital gains or losses incurred from short selling against the box are not deferred. The tax implication is that any related capital gains taxes will be owed in the current year.
Try what? I am trying to understand if there is any reason why one would deploy such a scheme in a legitimate way. I have not heard (maybe not understood) anything from anyone to convince me that there is any reason to do it. Sig, Sle, and Des (Robert was too nice) telling me I'm an idiot, doesn't give me confidence to try anything live at this point