Continuously shorting IT stocks overnight and buying back at market open (opens in new tab)

(blog.abctaylor.com)

46 pointsarcza1y ago21 comments

21 comments

While I'm not suggesting it's a good strategy to short continuously, unless you short a hard to borrow stock, the borrowing fee for shorting a stock is typically much lower (as in 0.25% yearly) than the interest you can get on the cash you get to hold after short sell a stock (should be 4.5%-5% with the current fed funds rate).

So, other than the transactions fee, shorting a stock that doesn't move is a way to arbitrage the spread between the Fed funds rate (minus 0.5% or so depending on your broker) and the stock borrowing rate.

arczaOP1y ago

Yep. As a retail guy though, I get no rebate however on that cash. I just pay the 25bps pa AFAICT.

almog1y ago

Not sure about other brokers but with IBKR I get paid interest on shorted stock. If you don't your borrowing fees are essentially higher than they could be.

1 more reply

electroly1y ago

I wonder if the author meant to pick Akamai (AKAM), not Alkami (ALKT). The latter is an odd choice among the rest of the picks. I suspect they have mixed up the names.

arczaOP1y ago

I rushed my post and skipped QA, went straight to production. (fixed, thanks)

financetechbro1y ago

Thanks for the write up. There is a typo in your third thesis bullet, I believe “stratefy” should be “strategy”.

Also - I’m curious as to the outcome if you were to exclude AMZN and MSFT. I think their size and broad array of product offerings skews the outcome for this analysis

1 more reply

meatmanek1y ago

> Should we trade telcos? > Nope, BGP is a great protocol used in the Internet; it would be so difficult for a single name stock to take down the global Internet.

hahaha hahahahahaha hahahaha hahahahahahahahahah

this is a joke, right?

https://www.kentik.com/blog/a-brief-history-of-the-internets...

scosman1y ago

There’s a decent amount of “good news overnight” because of time zones.

Samsung release earnings with higher than expected phone demand, Apple will drop. Apple releases higher device projections, TMC will rise. Nokia releases new projections, people say “oh yeah, Nokia is a thing”.

modeswitch1y ago

What about limiting your exposure to companies that operate in the same time zone as your stock exchange?

vineyardmike1y ago

Only if their suppliers and competitors are in the same time zone too.

cedws1y ago

A better strategy might be to monitor social media to try and gain intel ahead of the market, but it's a arduous task, even with LLMs.

jfengel1y ago

Especially since everyone else is doing exactly the same. The entire point of social media is that it's not a secret.

vineyardmike1y ago

But the whole point is that it's "passive" and trading is closed off-hours.

ramon1561y ago

What if instead of that we use intel from insiders and buy stocks using that!

Oh wait, that's illegal when you're not a billionaire.

alan-hn1y ago

Don't forget you can do it when you're an elected representative too!

1 more reply

zooq_ai1y ago

Stocks can tick upwards (between close and open) and there may be more up days than down days destroying your strategy

arczaOP1y ago

Correct but respectfully I think you didn't read the post fully. I mentioned within I'd hedge by buying an equal dollar amount of NDX futures which makes it a bit more beta neutral. If those stocks rise, so does the NDX, and my losses on the shorts are offset. But the whole thing won't work anyways due to high trading costs. Unless somehow you can make markets very well at huge scale.

j / k navigate · click thread line to collapse

21 comments

almog1y ago

arczaOP1y ago

Yep. As a retail guy though, I get no rebate however on that cash. I just pay the 25bps pa AFAICT.

almog1y ago

Not sure about other brokers but with IBKR I get paid interest on shorted stock. If you don't your borrowing fees are essentially higher than they could be.

1 more reply

electroly1y ago

I wonder if the author meant to pick Akamai (AKAM), not Alkami (ALKT). The latter is an odd choice among the rest of the picks. I suspect they have mixed up the names.

arczaOP1y ago

I rushed my post and skipped QA, went straight to production. (fixed, thanks)

financetechbro1y ago

Thanks for the write up. There is a typo in your third thesis bullet, I believe “stratefy” should be “strategy”.

Also - I’m curious as to the outcome if you were to exclude AMZN and MSFT. I think their size and broad array of product offerings skews the outcome for this analysis

1 more reply

meatmanek1y ago

> Should we trade telcos? > Nope, BGP is a great protocol used in the Internet; it would be so difficult for a single name stock to take down the global Internet.

hahaha hahahahahaha hahahaha hahahahahahahahahah

this is a joke, right?

https://www.kentik.com/blog/a-brief-history-of-the-internets...

scosman1y ago

There’s a decent amount of “good news overnight” because of time zones.

modeswitch1y ago

What about limiting your exposure to companies that operate in the same time zone as your stock exchange?

vineyardmike1y ago

Only if their suppliers and competitors are in the same time zone too.

cedws1y ago

A better strategy might be to monitor social media to try and gain intel ahead of the market, but it's a arduous task, even with LLMs.

jfengel1y ago

Especially since everyone else is doing exactly the same. The entire point of social media is that it's not a secret.

vineyardmike1y ago

But the whole point is that it's "passive" and trading is closed off-hours.

ramon1561y ago

What if instead of that we use intel from insiders and buy stocks using that!

Oh wait, that's illegal when you're not a billionaire.

alan-hn1y ago

Don't forget you can do it when you're an elected representative too!

1 more reply

zooq_ai1y ago

Stocks can tick upwards (between close and open) and there may be more up days than down days destroying your strategy

arczaOP1y ago

j / k navigate · click thread line to collapse