Discussion in 'Trading' started by stock777, Nov 8, 2010.
Would you rather have shorted LVS from 150 to 1.50 or bought it at 1.50 and rode it to 55?
What's behind door #3 ???
in the Library;
with the 26" monitor?
I expect a failure rate of approx 78%, which would be normal for ET
Can I choose both?
PS: you failed to indicate the time frame, which I think you assumed is the same for both alternatives, but I wonder if you realized the importance of time.
Strictly based on the numbers, I'd have to say $1.50 to $55 based on capital outlay and risk-reward.
Equal shares comparison:
A) 1000 @ $1.50 = Risk $1500, Reward = $53500.
B) 1000 @ $150 = Risk $150k, Reward = $148.5k
Equal dollar comparison:
A) $1500 gets you 1000 shares at $1.50 with the same net ($53.5k)
B) $1500 gets you 10 shares at $150, with a net of $1485.
However, this question is a bit loaded, since there is no scenario information, etc. Also, $1.50 price tags fall under my radar as things are usually that cheap for a reason.
Long from 1.50, without even a doubt. It's all about return on your capital. Do some basic math and see how much money you would make on the first versus the second trade with $15,000.
i would've longed simply because you can only lose 1.50 per share on the long side if all hell broke loose but when you short there's technically an unlimited risk
are we learning ABC's now?
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