PSL4 - One Modification - SHORTING:
This is a repost from PSL3.
We are very happy with the way the rules were set up for PSL3. It took three contests to get it just right, but we think we just about have it.
SHORTING
We decided to allow one thing that we have not allowed in the past. Part of the reason for this is because there has been more discussion of shorting on VMC than in the past. But, the main reason is because the markets have weakened from previous PSL contests and our group performance in PSL3 showed it.
Thus, we think it makes sense to allow selected shorts as one option for the WILD CARD.
In PSL3, the WILD CARD could be a stock that had no earnings or no reporting. That is still true. If you want to make that your WILD CARD, you can. However, if you want to make it a short, you can do that instead. Theoretically, it could be a non-earner and then you could trade it for a short later.
SHORT DEFINITION: The shorts that will be allowed, will be "market shorts - ETF's" as opposed to individual stock shorts. The only ones we know of are below:
Nasdaq 100: QID
S&P 500: SDS
S&P MidCap 400: MZZ
Dow Jones Industrial Average: DXD
These are all double-beta shorts against the corresponding index.
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One more thought on this. Let's say you are fairly negative on the markets. Some of you may feel you have a hard time coming up with 6 long positions before September 15th for PSL4. However, by allowing a short position, here is an example of what you could do.
Pick 3 longs, GE, 1 short, 1 cash. You cannot double down for two weeks, but after two weeks, double down your GE into cash and you have 3 longs, 2 cash and 1 short (which is a double-beta market short). As you can see, this is a VERY conservative position.
Now, let's say as the contest goes on, you decide you are more optimistic. You still have two transactions left. You could, hypothetically, trade your 2 cash positions into a new long and you could either trade your short into a new long or double it down into one of your other 3 longs. Either way, you are back to 100% long.
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The short position simply gives a person more flexibility if they are either 1) Not optimistic on the markets or 2) Cannot come up with 6 longs out of the gate.
Len
Warren Buffet: 5 minutes and 17 seconds of pure, unadulterated, bulletproof, flawless logic.
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