Personally I don’t know why someone would be doing this. Does it ring in profits? If yes, and if someone has had good experience operating both short and a long trade at the same time, please do share.
I dont see anything wrong with you getting a comargined sub account and doing exactly whatever it is you want to to do. Many times being in the mkt is all you need to relax and being perfectly hedged by selling a short contract against your long might be all you need. I see how you could sell a contract to hedge and lift the hedge once u thought the mkt would turn around. also it would alleviate the fear that your are being gamed because you can trade by hedging basically as well as depending on position size push the mkt to another price level with offsets of size anyway you could either stop out and re enter ot just keep adding and lifting your hedge. which isnt all that bad of an idea. easier for futures than stocks though for sure. would also help with timing because ur only dumping the wrong one. ur already in the mkt so it seems like less friction.
I am confused here, is it an arbitrage play of some sort. Are we talking about different share classes, ADRs/GDRs or non-fungible exchanges here? Cause for the life of me I can't see a situation where you'd want to create a boxed position on purpose, especially in stocks where you pay financing on one leg and borrow on the other leg.
its not an arbitrage play at all. if you start out getting long the ES at 9:45 in 1 accoutn and then the rest of the day you day trade a sub account in the ES against this position i would say you are hedging with a perfect ratio. if the mkt starts selling hard you sell your es sub account and buy it back when you think the mkt has stopped dropping you would be surprised how many people actually trade this way. they take a position and trade the same symbol against it in a sub account.
it doesnt matter what other people say or do it matters if you make yourself money. you can do this anyway you want to in the market. would you rather i just stopped out all the time or should i just sell an es in a sub account and wait and if im wrong I am covered. do some fake trades on paper and look at what it can do to your bottom line. it give you holding power because once you exit your short at a priofit you have reduced your average buy in on the long by that profit amount so even if it doesnt get to break even you could still have profits. im not sure why more people dont see this as being an advantage based on your time frame also if holding overnight you can sell 1 for 1 against your position and you have no worries. there is just something comforting about being in the mkt hedged that allows you to think versus just being naked even in the futures. sure it might cost a commission but who cares if you are cutting those losses.
Lastly this also keeps you more annonymous from the stand point of entry. over and over entry entry entry.. many people will long and short the same mkt at the same time with sub accounts and then lift the one or exit the one that is not working. this way you are in the mkt but staying unemotional and dumping the one that is not working it also alleviates the OMG they knew it was me syndrome of new traders.
ha ha i said lastly, here is another thing. many times when hedged lets say yu got long today in the nq at 11,680 it dropped to 11,670 and you sold 1 to hedge and it dropped to 11,560. you are net - 2,400 but you are up 2200 on your perfect hedge. you are down 200 bucks overall still of course and you now are breathing not worried but you really feel like it is way way over sold now. you wait for the mkt turn that is the key you waited and you had a level head and you lift your hedge when the mkt hits 11,580 so you locked in a hedged profit of 670-580 = 90 pts x20 = 1,800 in gains now your original position is at 680-580=100 pts or 2000 loss so you are still down 200 bucks but you are now in a position where the mkt due to the idea that we are in a bull mkt and you saw it as a good point to buy and it is DOWN HUGE. you lifted the hedge. the mkt boosts due to massive short covering 30 points and you exit your trade. 680-610 = 70 points loss = -1,400 you gained 1800 on your hedge so 1,800 -1,400 you are now on a realized 400 dollar gain. obviously you still must trade appropriately but doing this will reduce stop losses whch costs a commission anyway and it allows you time and energy to look at the market unemotionally. I am all for it.
the flip side of this is you cold have also just lifted or took the loss on your long and as the mkt fell hard instead of selling into to open a new position you are selling into it to cover which from my experiene makes a difference