Newbie: Exploring relative price difference?

Discussion in 'Options' started by vhe, May 25, 2012.

  1. vhe


    This is probably a very simple question, but here is:

    Let's assume I believe a stock will underperform another.

    Is there a way to make profit from that knowledge?

    Lots of Greetings!
  2. TskTsk


    Long performer, short underperformer
  3. vhe


    Thanks a lot!
  4. Based on the very probable assumption that you are wrong, short the outperformer and go long on the underperformer.

  5. Not enough info, what do you mean by underperform, XYZ +5% and ZYX +4% over a period of two months?

  6. Belief is not Knowledge.

    In effect, you are asking how to profit from guessing, and that doesn't have a simple answer.
  7. vhe


    It was just a curiosity question, whether this is possible in principle.
    It popped up in a discussion with someone. I thought that it's possible, given any information about the market, to create a portfolio that makes a profit if that information turns out to be right.
    Relative performance was just an example where I couldn't think of a solution offhand. Also the discussion I had with these guys wasn't specific enough for things like absolute delta or some sort of fractional gain.

    Anyway, thanks a lot for your answers!