Tag Info

Hot answers tagged longshort

4

Think of this in terms of Taylor series. Let's say the option price today is $C\left(S,t\right)$ where S is the underlying price and t time. Let's say the underlying price changes by $\Delta S$ in a time interval $\Delta t$, so your P/L will be: $\mathrm{P/L}=C\left(S+\Delta S,t+\Delta t\right)-C\left(S,t\right)$ Use Taylor series to first order in t and ...

2

You should have bought your (long) stocks with the proceeds of the ETF sell.

1

While it is of course possible to apply standard definitions of returns, one needs to bear in mind that a long/short portfolio may end up having a net negative value. Thus: i) You cannot use continuously compounded returns. Starting out with a positive portfolio value, continuously compounded returns can never take you to a negative portfolio value whatever ...

1

What seems to be your problem? Which calculations do you do that will not give you a decent answer? Your portfolio value is NAV = 98.87 and the next day it is: NAV=98,57. $$r=\frac{NAV_1-NAV_0}{NAV_0}=\frac{98.87-98.57}{98.57} = -0.0030=-0,30\%$$ Also, be aware that you weights are not $1$ and $0.5816$ anymore but $$w_{ABC}= 97.79/98.57$$  w_{XYZ}...

1

The long short portfolio you created is highly leveraged. That means it requires investing much more than the amount of capital you have, the additional capital would have to be borrowed. In your portfolio the sum of the positive weights is 548.667 and the sum of negative weights is -448.665. The sum of these numbers is 100 so you have a 1 to 1 exposure to ...

Only top voted, non community-wiki answers of a minimum length are eligible