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I'm wondering if you can you do leverage trading with both a short and long position on the same stock or if it's stupid.

If I understand correctly once you get to your stoploss you lose everything you put in, in the case of a turbo. However what I don't understand, is that, if you expect the market to fluctuate heavily in either direction, if you hold both positions of a leveraged short and long you should be positive after reaching one of your stoploss.

So for example I buy short and long position for 500 on a 10$ title and the stoplosses are at 4$ and 16$. If the title reaches 18$, I'd be in the positive right ?

Also if the market is going cyclically with lows and ups, what stops you from selling your short position on the lows, and your long position on the highs ?

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    Can you clarify what leverage trading with both a short and long position on the same stock is? What is the actual position? Apr 5, 2020 at 13:29
  • @BobBaerker I mean buying both a long and a short turbo
    – Ced
    Apr 5, 2020 at 13:43
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    I'm not familiar with "turbo" but what you're describing sounds like a strangle. The issue is that if volatility is expected then the cost to open those positions is high and means you need a much more significant move to profit. Not entirely sure if relevant to what you're asking about.
    – Hart CO
    Apr 5, 2020 at 21:56
  • @Hart CO - My initial thought was also a strangle but I asked for clarification because I didn't know what a turbo is. From Wiki, "A rolling turbo is a financial derivative popular in Germany introduced by Goldman Sachs in 2004. It is tradable by institutional and private investors and has characteristics similar to contracts for difference.The value of the underlying stock is multiplied by the leverage value to give the value of the rolling turbo. Unlike other financial derivatives the leverage of a rolling turbo is kept constant on a daily basis." I have no clue about turbos so I took a pass Apr 6, 2020 at 4:18
  • @BobBaerker I guess it's just a sort of leveraged investment. I'm not yet familiar with the whole space but I'd assume they are all quite similar
    – Ced
    Apr 6, 2020 at 9:29

2 Answers 2

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The short answer to your question is no. You have to put in one trade before the other right? So you buy 500 shares, now you're long 500 and you want to put on your second trade i.e. short 500...how do you do that? Well, you sell 500 and now you're flat, right back where you started. So you sell 500 more and now you're short 500. Then you try to go long and do the same dance in reverse.

You can't hold both a long and short position at the same time in the same account. Well, you might think, what about different accounts? Sure you could do that, but its wishful thinking of this flavor - Well if i was long here and short there, then i'll just take off whichever one is making money...keep the other one until it makes money, then take it off too...making money both ways. Score!

Hold on one sec. The stock is trading $10, you go into brokerage account A and sell 500, then into brokerage account B and buy 500. Next day, the stock is down to $4. Acct A just gained $6/share and acct B lost $6/share. You pnl across both accounts is zero...or actually negative when you account for commissions (if any) and margin fees. So now you close the winning position in account A and wait for the market to go the other way.

I put it to you that it is at that point that you're actually putting on a trade. You decision of where to take off your short position is actually a decision of where to go long. Furthermore, you left the decision of being long or short up to the randomness of the market. If things had gone the other way, you would have been taking off a long position and going short. You might as well have saved yourself the multi-account headache, stepped into the market on a random day and flipped a coin to pick whether to buy or sell.

You should have a well-thought out point of view/thesis, and a range of expectations that anchor your decision-making as you step through the lifecycle of any trade. Absent that, Vegas might be more fun than getting all wired staring at numbers on a screen all day.

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  • I think that the OP's question is about a derivative security used in Germany call a turbo, not options: en.wikipedia.org/wiki/Turbo_(finance) Apr 6, 2020 at 4:21
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    @BobBaerker Ahh! Silly me...i should read bit more carefully. I don't know anything about turbos, hence, not even sure if my example applies. What's the appropriate thing to do here...delete the answer? Thanks for the catch.
    – WittyID
    Apr 6, 2020 at 5:24
  • What's the appropriate thing to do? I have no clue. Leave it and if people want it gone, they'll vote to close it. You put in the effort and the answer makes sense even though it was the answer to a different question (wink). Do whatever amuses you :-) Apr 6, 2020 at 10:23
  • "You might as well have saved yourself the multi-account headache, stepped into the market on a random day and flipped a coin to pick whether to buy or sell." -- except that you now have a positive realized PnL. Is it really the same?
    – Alpha
    Dec 15, 2022 at 21:08
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I agree that the shirt answer is no.

However, you should research “delta neutral options trading” strategies. This is how market makers make money on your trades no matter which way the market goes.

Another strategy would be to sell a put spread AND sell a call spread.

I don’t suggest you try any of this before you thoroughly understand options gamma, Vega, Theta, and more. There are too many other trap doors in options trading to mention here.

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  • I think that the OP's question is about a derivative security used in Germany call a turbo, not options: en.wikipedia.org/wiki/Turbo_(finance) Apr 6, 2020 at 4:19
  • Oh good point, now I see that line. Turbo sounds similar to Direxion 3x leverages ETFs Apr 6, 2020 at 4:30

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