[adios]

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I would stay very far away from these investments.

First, stocks have a positive expectation (derived from the risk premium). Shorting an asset with a positive expectation is -EV.

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this is very poor reasoning.



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I know his reasoning can't be correct, but I don't see why. Can you explain further?

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it is very simple. shorting an asset with a positive risk premium can be + EV.

if you expect the price to move down to a certain degree within a certain timeframe, why would you not short it?

look at it in the converse. since ALL assets have some risk premium built into them (except developed world currencies), gull is saying that it is -EV to be short anything. that is clearly not the case since there are many a time when ex ante being short is correct and + EV.

even breaking apart the term "risk premium" we see that you are being compensated for taking risk. risk implies volatility and volatility implies up and down moves. if you can forsee a downmove (not easy but certainly doable) and you have the ability to take a short position in it, clearly you can profit in expectation.

Barron

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Ohhhhh Barron, you and your silly multi-paragraph answers. Next time just say "short-run vs long-run"

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QFT