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Short the 2x short

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
1nvest
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Short the 2x short

#410929

Postby 1nvest » May 11th, 2021, 2:20 am

50% short of the 2x short stock can when downside volatility is high prove to be quite defensive when combined with also holding some long dated treasury/gilt.

2008 -7% instead of -37%. Chart in the above link is best viewed when the 'Log Scale' tickbox is ticked.

Barnhouse
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Re: Short the 2x short

#410943

Postby Barnhouse » May 11th, 2021, 7:49 am

There be dragons with this strategy. When you drill down to daily and intraday data the rebalance requirements and portfolio swings are onerous. Much of the outperformance comes from buying heavily during the huge volatility events. Plus the costs of shorting a stock make it a non starter for me. Be warned and do your modelling correctly before attempting this.

However that is not to say there are not occasional profits to be made from buying into the large declines maybe discretionary but probably better with a rules based approach such as AIM or threshold rebalancing with very wide bands.


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