Hedge fund strategies: Long short 1 | Finance & Capital Markets | Khan Academy

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Setting up a simple long-short hedge (assuming the companies have similar beta or correlation with market). Created by Sal Khan.
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Finance and capital markets on Khan Academy: Hedge funds have absolutely nothing to do with shrubbery. Their name comes from the fact that early hedge funds (and some current ones) tried to "hedge" their exposure to the market (so they could, in theory, do well in an "up" or "down" market as long as they were good at picking the good companies). Today, hedge funds represent a huge class investment funds. They are far less regulated than, say, mutual funds. In exchange for this, they aren't allowed to market or take investments from "unsophisticated" investors. Some use their flexibility to mitigate risk, other use it to amplify it.
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[@carlottabertolino757]

Clearest video I've seen so far about market neutral strategies. First time I did not feel like I needed a degree and 10 years experience to understand. thank you

[@milesholcomb5819]

When did Kahn academy start investing

[@SA-oq5lz]

He used to work for a hedge fund

[@andrewton7801]

OK, time to start a hedge fund. $$$

[@connorfrancis6022]

Good luck

[@teenspirit1]

How did it go?

[@user-iy9mx4pm5z]

long📈= buy short📉= sell short

[@EmanSLived]

but to "sell short" implies that we have those 2 shares already...

[@Chuks907]

I will be forever grateful to you, you changed my whole life and I will continue to preach on your behalf for the whole world to hear you saved me from huge financial debt with just a small investment, thank you Laurie Siebert.

[@brownscott3885]

I invest with Laurie Siebert too, she charges a 20%commission on profit made after every trading session which is fair compare to the effort she put in to make huge profits.

[@barbara.ransom]

This is not the first time i am hearing of Laurie Siebert and her exploits in the trading world but i have no idea how to reach her.

[@scottharryx]

As a first time investor I started trading with her, with just a thousand bucks. my port folio is worth much more that now within just weeks of trading with her

[@Chuks907]

She often interacts on Telegrams, using the user name written below

[@Chuks907]

SIEBERT6 💯 ..that's it

[@Alezander333]

dude what happened with napoleon ? are u going to continue his story or not ?

[@willfowls2400]

long short the same asset seems more sensible as B is unrelated to A - makes sense to buy A and short A - given you expect A to decrease from current price within 3 months , but expect it to trade over current price in 3 months to 6 months - A is related to A - even if A and B are in the same sector there are too many non-shared variables...

[@user-fs3jo3nz7s]

Wouldn't that be at 0 profit? Let me know if I am wrong

[@investor9482]

@@user-fs3jo3nz7s Yes. All the would have done is increase transactional costs. The way this could work is with synthetic longs and shorts (i.e., using options) which has its own issues (paying more for theta in the longer term option)

[@investor9482]

Ideally companies A and B are related. For example, MSFT and AAPL have (to my knowledge) correlation greater than 0.95. You can also look at similar beta stocks or stocks with the same implied volatility or look at covariance.

[@ajayyoutube1286]

long short posistion will already cancel out eachother

[@willfowls2400]

@@user-fs3jo3nz7s you're 100% right if you hold both the long and short sides of the trade for the whole 6 months. though, if your 3 month view is that price will be below current levels, and your 6 month view is that the price will be above current levels, you can short the asset now and buy to cover in 3 months for a profit. then when price moves up over the remaining 3 months of the trade you can close your long position at 6 months from entry, benefitting from both the downside and upside of price movement in the asset. this type of strategy isn't typically used in this way, it's more common to be long stock and either short calls or long puts in the same stock to benefit from short-term downside in the stock. using the same asset for hedging preserves the perfect correlation the video states is occurring from two different assets, which is extremely rare

[@mesa134]

i started trading with only 2000 bucks...its never too small to start..

[@Miguel-fh7bv]

what's ur balance now?

[@jinxy7869]

@@Miguel-fh7bv probably blew his account

[@Miguel-fh7bv]

@@jinxy7869 😂😂😂😂

[@NEVERGIVEUP-hi3em]

Do they use derivatives market to make such profits?

[@user-yx4oi4xt8r]

I actually did the same trick in the stock market but was confused about its effectiveness，thanks for this video which confirms this practice and boosts my confidence！

[@syedgolabarefin1615]

I like what you explained.

[@LoffysDomain]

1:13 what does "short a company" mean. (Beginner.)

[@user-iy9mx4pm5z]

sell short

[@LoffysDomain]

@@user-iy9mx4pm5z companies with short names? what about abbreviations?

[@alvarolopez8448]

@@LoffysDomain Its important to learn about derivative financial products and forward contracts before getting into quant finance, read a few articles from moneychimp.com on the basics of investing and work your way up. Hope it helps!

[@LoffysDomain]

@@alvarolopez8448 thx but I am buzy and lazy --- was just looking for a quick and simple one. Is there _no_ way to get rich fast, legally? ;-)

[@davidbbb6490]

@@LoffysDomain Think of it as borrowing a companies shares from guy X, and promise to give them back later. You borrow the shares and sell them in the market (let's say you sell them the same day) to guy Y. Now you still have to give those shares back to guy X so you wait until the shares are now (hopefully) worth less than when you borrowed them. If they are worth less than when you borrowed them initially from guy X to sell to guy Y, then when you buy the shares from anyone in the market and give them back to guy X you will have made a profit on the "spread" of the value.

[@kingtigercrownestate9102]

It seems like hedge funds would always just wind up breaking even on this kind of strategy if they gain as much on one as they lose on the other.

[@freegiftcardglitch]

If a went up , would go down if b went up a would go down basically risk free trading as only these 2 things can happen

[@user-iy9mx4pm5z]

buy A = 10$ sell 2*B = 10$

[@brandonc7252]

I think this guy does those math videos.

[@yeakubaliakthar7621]

Ummm I'm 11 can someone break this down to me

[@zaccy]

So lets say you are completely wrong. B gets dumped and A goes up. Are you now rekt?

[@Mfam777]

Yes. Which is why this is actually a very poor strategy

[@gatersaw]

This is THE ONLY way to trade if you want to accumulate wealth.

[@anonimu0000]

Maybe you explain to us , we are fools

[@quantstyle6448]

Stocks without dividends meet the SEC’s definition of a Ponzi scheme. Profits come from other investors, not the company. Look up “The Ponzi Factor”

[@xXxIMMORTALxXx]

Not necessarily. Growth stocks of those up and coming companies that do businesses of the future and haven't turned profitable have no dividends, TSLA for example.

[@quantstyle6448]

@@xXxIMMORTALxXx Right. The "future"! You know what's great about your explanation about the "future"? No one can ever prove you wrong. Lol Please look up what an unfalsiable statement is. It's the equivalent of nonsense.

[@xXxIMMORTALxXx]

@@quantstyle6448 people can still argue and prove me wrong because not every business for the future with no dividends will eventually become successful. Look at NIKOLA for example. I mean if you're a kind of investor that go for well established blue-chip companies that pay dividends then that's your choice, your strategy. It represents "your view" of the world. Some other people whose views differ and go for growth stocks have made amazingly 6xx% this year alone including myself from companies that don't pay dividends. So I just put my comment out there to let other people know that what you said initially wasn't the truth. Ponzi scheme is like what Bernie Madoff did. Essentially he's got no business whatsoever just put investors money in the bank and find more investors and use their money to pay back the early investors and it goes on and on for decades. Up and coming companies (not all of them are legit for sure but most are) do have real businesses. They have missions and what they are trying to solve and some of them have been proven to becoming legit and successful. Again TSLA for example has been officially included in the S&P500 on this past Monday. They still pay no dividends but that is fine I'm happy with the stock that is up 10x in a short amount of time. I have my own way of managing my risks. And I'm sure you do which is to probably buy stocks with dividends.

[@quantstyle6448]

@@xXxIMMORTALxXx No. The point is, a stock without a dividend definitively and observabley, meets the definition of a Ponzi scheme. There is nothing hypothetical about that. The only way people can defend such Ponzi schemes in practice is with hypothetical nonsense about future value and such. And, it is completely illogical to use hypothetical assumptions to refute observable facts.

[@alfonsopayra]

@@quantstyle6448 we all know Ponzi was a lazy short-sighted genius, I just wanted to put this out there 🤣🤣 please continue..

[@helengranterliech4523]

Little too risky in my book. Forget about hedge funds, it's 2013 now Low Risk and good yields like penny Stocks are the way to go wellsbee.com provides some good picks in the current market.

[@user-yj2lq8bq3i]

So lets say you are completely wrong. B gets dumped and A goes up. Are you now rekt?

[@theoriginalwasa]

I think it's just illustrative. There's more than 2 companies out there. Ever tried to flip heads 100 times in a row?