Replies to post #23119 on Capstone Green Energy Corp (fka CGRNQ)

[Wild-bill]

short against the box

Investor vs. trader consideration comes into play because ...
1. Interest expense must be weighed against
2. Expected degree and timing of downward movement so that
3. Shorts are closed when it at least offsets that expense.

If you get all that right you can be market-neutral through the point where you close the short positions, have a realized profit when you close. The maximum realized will be offset by unrealized losses in the long positions, trade friction and the carrying expense of the short positions if it takes a long time to hit your exit target price. A fast move to target would be ideal.

In short, you'll be doing essentially what hedge funds do, not very successfully for most of them in the last few years as they under-performed "the market", with (I guess) fewer support resources to "time the market" correctly enough to make it profitable.

Then one might decide that profit is not the goal, but rather "hedging" to obtain much smaller unrealized losses as you continue in your long position. Same considerations apply but the small losses from trade friction and carrying costs are the expected and acceptable outcome from this.

Long-term one has slightly diminished realized gains when the long positions gain value but in exchange you sleep better?

Risk/reward comes into play. The reward max is down about $0.50 and the loss max is theoretically infinite. Practically, a reasonable target could be at least $1, $1.50, ...

The time to have gone short would have been when price was high, not when it's down here IMO.

Additional: if I am so-so at timing and predicting moves, and I'm being rather generous to myself I think, the only reason for me to consider the strategy is "profit is not the goal, but rather "hedging" to obtain much smaller unrealized losses". It's always possible I might have a short-term burst of brilliance and get directions and timing right though.

But for me I don't want to count on that and trying to do it on this stock, especially at this price point, seems somewhat risky.

I would also consult with your broker for specifics and additional considerations.

My uninformed humble opinion,
Bill