How can I bet against a particular stock in relation to the market?
How can I bet against a particular stock in relation to the market?
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philfreo · External communityPost link
External question — Personal Finance Stack Exchange
Author: philfreo
Original post: https://money.stackexchange.com/questions/150458
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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I’ve heard people doing spread trades when they think one stock will do better/worse
in comparison to
another stock or index. I’m looking for details on exactly how this is done.
Is there a particular trading mechanism that would allow for:
Make money if X stock goes down in relation to e.g. S&P 500?
I would also add that I’d like the losses to be limited to the amount of investment (not unlimited) in case X outperforms the market.
Ideally looking for a way to trade where I would make money if X goes down even if the entire market / S&P 500 also goes down, as long as X goes down more (probably in terms of %)
Is this possible? Specifics of mechanics appreciated.
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William Walker III · External communityPost link
External answer — Personal Finance Stack Exchange
Author: William Walker III
Original post: https://money.stackexchange.com/a/163272
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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Any mechanism that allows you to position yourself in this relationship between stock A and stock B can be performed with a reasonable proxy for the performance of any index that has an associated ETF. The relationship isn't 1:1, but it's close enough for the overwhelming majority of cases.
For the S&P 500, SPY is the obvious proxy and has an options chain. Otherwise the related questions answer you. Especially "
How do I bet one stock will outperform another stock?
"
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Quoted from Forex.com.bd-Editorial External question — Personal Finance Stack Exchange Author: philfreo Source score (net votes, not local likes): 5 Original post: https://money.stackexchange.com/questions/150458 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I’ve heard people doing spread trades when they think one stock will do better/worse in comparison to another stock or index. I’m looking for details on exactly how this is done. Is there a particular trading mechanism that would allow for: Make money if X stock goes down in relation to e.g. S&P 500? I would also add that I’d like the losses to be limited to the amount of investment (not unlimited) in case X outperforms the market. Ideally looking for a way to trade where I would make money if X goes down even if the entire market / S&P 500 also goes down, as long as X goes down more (probably in terms of %) Is this possible? Specifics of mechanics appreciated.
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