What causes the asymmetry between being long and short in a stock?

If I go long (no leverage) on a stock that rises from $1 to $1000 I can turn $1000 into $1,000,000, a 99,900% profit

If I go short (no leverage) on a stock which falls from $1000 to $1 I can turn $1000 into $1999, just a 99.9% profit.

Why does this asymmetry exist?

  • 6
    Because stocks can easily grow to more than double their present value, but can never lose more than 100% of their present value. It's just math. Am I missing something else in your question here? – CactusCake Jun 7 '17 at 13:02
  • If a stock went from $1000 to $2000 the profit would be 100%. – Victor Jun 7 '17 at 20:58

The asymmetry exists because your starting points are different by a factor of 1,000, so percentage changes are 1,000 times different in absolute terms.

A rise from $1 to $1000 is a 99,900% rise, but a fall from $1000 to $1 is only a 99.9% fall. So in percentage terms, the profit is symmetrical. A long position where the stock rises 10% will have a 10% gain. A short position where the stock falls 10% will have a 10% gain.

It has nothing to do with long and short, just an asymmetry between percentage change and absolute change. If you were long $1,000 on two stocks, one went from $1 to $1,000, and the other went from $1,000 to $1, you'd have a 99,900% gain on the former and a 99.9% loss on the latter.

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