Suppose I have 2 trading strategies that independently comes to a conclusion, that in a market day, I am supposed to Buy X shares of Stock A and Sell Y Shares of the same stock A. Now, this need to be executed in the market. I can either do: (WLOG Assume Y>X)
- Buy X shares of Stock A and sell Y shares of Stock A (or)
- Sell (Y-X) shares of Stock A.
Both will get me to the desired position by the end of the market day. What are the advantages of doing (1) over (2) or vice versa.
Some points I could think of:
- Transaction cost of (2) will be less than (1)
- If I know how the Stock A is going to behave today(i.e increase/decrease), I can use it to buy low and sell high. But this comes with an inherent risk and is thus not preferred.
Apart from these, can you please suggest some more reasons.