Long and Short the same stock and Guaranteed Stop Loss

[nashill]

i am thinking this strategy

- lets say a stock is about to report its earnings
- i went long with a guaranteed stop
- and then shorted it with a guaranteed stop

now i am long and short on the same stock

- after 1 day, the company reported their quarterly earnings
- stocks went 15%
- i got stopped out of my short position (- 5%)
- i am up 15% on my one position

overall profit is 10% ????

have you guys tried this?

 

[Lee Shepherd]

i am thinking this strategy

- lets say a stock is about to report its earnings
- i went long with a guaranteed stop
- and then shorted it with a guaranteed stop

now i am long and short on the same stock

- after 1 day, the company reported their quarterly earnings
- stocks went 15%
- i got stopped out of my short position (- 5%)
- i am up 15% on my one position

overall profit is 10% ????

have you guys tried this?

I figure more to the point that you haven't tried this. What if.....The market spikes and takes both trades out. What you are proposing seems very simple and easy and although we are always told to 'Keep it simple'...... have you thought that it may be a little too simplistic. Also bear in mind that a lot of the time the expected news is factored into the price. There are a lot of big players out there that literally pay people to monitor how much money goes through the tills, in some cases (and it has been known many a time, excluding insider dealing) the big players in the financial world will know before the accountants and directors what the figures are.

 

[johnsou]

Have you had much luck with this regularly? I tried a few times and it didnt work out so great for me. What broker you using?

i am thinking this strategy

- lets say a stock is about to report its earnings
- i went long with a guaranteed stop
- and then shorted it with a guaranteed stop

now i am long and short on the same stock

- after 1 day, the company reported their quarterly earnings
- stocks went 15%
- i got stopped out of my short position (- 5%)
- i am up 15% on my one position

overall profit is 10% ????

have you guys tried this?

 

[coopster]

Is there much point to being in the trade at the same price in both directions at once?

Surely a guaranteed order entry price just above and just below the current price does the same thing? The stop losses can be automatically set with guarantee as before. This keeps your money off the table until it's needed.

Also, you can then use an OCO order (one cancels the other) on the entry orders, this means as soon as one is triggered, the other order is deleted. Therefore you'll only ever have one loss and not get whipsawed into losing on both trades as Lee Shepherd suggests.

 

[Rhody Trader]

Will a stock broker even allow you to be long and short at the same time? I would think not. In any case, if you buy and sell at the same time all you're going to do is lock losing the bid/ask spread.

 

[SybilCut]

It's just the same as buying a call and buying a put before earning: you're going to need a massive move due to the cost of doing this strategy. Guaranteed stops especially on stocks are massive in terms of spread costs, plus rollover. I did look at this though, unless you can be certain that a 10% or something move is going to happen i'd pack it in.

 

[forexanalyst]

I know someone that does this strategy with FX on the NFP announcement. Last I heard it was profitable but certainly not a guarunteed win.If I remember rightly, they set up pending guarunteed stop orders both ways just a few moments before the announcement. No matter how you set it up you will lose if it whipsaws I think but if you do it 100times and you're up then that's all that matters. You can go both ways on FX with any broker, don't know about stocks.I'm not convinced though, reminds me of being 16y/o and losing £160 on the roulette machine because I decided if I kept doubling up my bet on red then no matter how many times it came up black I would eventually recoup any losses! There are no guarunteed wins, just punts. Unless you're an arber of course!

 

[Rhody Trader]

You can go both ways on FX with any broker, don't know about stocks.

If by "go both ways" you mean you can have simultaneous long and short positions, then that's not true. US brokers are required to net out (FIFO, no "hedging") and I know of at least one broker who operates global who always has worked on a netting basis.