Great post as always, thanks Mr. Blonde. One stupid question about 40% net exposure. You have a note about it saying "100$ long index vs. 60$ short in respective index." I have a hard time fully understanding it. Does it mean that I buy 100$ of the index, at the same time, short the same index 60$? If so, why not hold only 40$ long position? Or does it mean that I long a put option (or short a call option) on the same index as a hedge?
no assume you are long $100 a basket of high quality stocks or a high quality ETF, then short $60 of an index that represents market exposure (i.e. RTY or SPX). you are $40 net exposed, or have 40% net exposure. hope that helps to clarify the comment
Great post as always, thanks Mr. Blonde. One stupid question about 40% net exposure. You have a note about it saying "100$ long index vs. 60$ short in respective index." I have a hard time fully understanding it. Does it mean that I buy 100$ of the index, at the same time, short the same index 60$? If so, why not hold only 40$ long position? Or does it mean that I long a put option (or short a call option) on the same index as a hedge?
no assume you are long $100 a basket of high quality stocks or a high quality ETF, then short $60 of an index that represents market exposure (i.e. RTY or SPX). you are $40 net exposed, or have 40% net exposure. hope that helps to clarify the comment
Makes sense. $100 long high-quality + $60 short RTY is exactly one of your charts. Thank you