Need advice: shorting and securies lending - Page 7

DesertCat · #61 06-27-2007, 11:48 AM

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Black-Scholes is a pricing model. Their big thing was "reversion to the mean" on the spreads. That IS T/A. They weren't studying geo-political events or anything like that to predict prices. That would be FA.

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I'm not sure you understand FA, it has nothing to do with predicting prices and rarely involves studying geo-political events. FA is estimating true value of an investment and betting that the market will eventually recognize that value. Their arb was exactly that. They knew two bonds have very similar values, so if they weren't priced similarly they were going to buy/short them and wait until they were.

There is no reversion to the mean, because there is no mean. There is only value and prices eventually reverting to correspond to that value.

CrushinFelt · #62 07-06-2007, 11:19 AM

I'm bumping this to ask a quick question for the TA folks.

What conclusions might you draw abuot this graph?

AUD

The reason I ask is because from a quick glance, it looks as though it varies quite a bit depending on the time-frame. I haven't read each response in this thread, and I know that an important part of coming up with a model is choosing a valid time-frame of data, so I'm curious to see what one of you might have to say about it.

Also, if you prefer daily data...

Daily Series

pig4bill · #63 07-07-2007, 01:07 AM

It was in a downtrend.

Now it's in an uptrend.

mr.trout · #64 07-07-2007, 01:09 PM

This isn't an answer to your question but more a response to those that said to avoid shorting.As a member of the NYBOT and former member of the IMM and NYMEX I can tell you
that shorting is a valid strategy. Please don't respond by
saying that these are futures exchanges. I also trade
stocks electronically. A few months ago I shorted MOVI
when it traded up on the "good news" that they were able
to refinance a 1B loan to basically keep from going broke.
The stock is now trading at 70 cents. The poiint is this.
If you do your due diligence and look at a commodity/stock
and its prospects are poor why wouldn't you short it?

bet2win · #65 07-07-2007, 10:01 PM

shorting is meh because you take a lot of risk, if the market goes against you then you lose a lot of money

as far as i know to short a stock you generally need to short a lot of them, dont think any brokers allow small trades like less than $10k

i'd much prefer buying a couple of put options over shorting because then your losses are capped

vassk1 · #66 07-07-2007, 10:06 PM

I once shorted AMZN and took a BEATING. Talk about multiple margin calls, lol. I don't think there is a minimum tho, at least not through who I was trading with, Ameritrade.

pig4bill · #67 07-08-2007, 12:02 AM

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shorting is meh because you take a lot of risk, if the market goes against you then you lose a lot of money

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You mean if you buy a stock and it goes against you then you don't lose a lot of money? Cool.

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as far as i know to short a stock you generally need to short a lot of them, dont think any brokers allow small trades like less than $10k

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Wrong. Someone is feeding you bad information.