What is the strategy 130-30′
In a 130-30 strategy is a strategy that uses the financial lever through the sale of bad stocks and purchases alternative shares, which should have a high income. In a 130-30 ratio implies shorting stocks up to 30% of the portfolio’s value, and then use the funds to take long positions in stocks the investor feels will outperform the market. Often, investors will simulate such as the index of the S&P 500 while choosing stocks for this strategy.
The strategy of destruction ‘130-30’
To participate in a 130-30 strategy, an investment Manager could rank the stocks used in the S&P 500 from best to worse on expected return, as signaled by past performance. The Manager can use a direct S&P and of the information, or information from additional sources such as the wall Street journal site marketwatch, Bloomberg and more. Of these the best ranking stocks, the Manager will invest 100% of the portfolio and sell the bottom rating on the stock to 30% of the value of the portfolio. The money earned from sales will be reinvested into TOP-ranking stocks, allowing you to diversify the higher ranks.
130-30 strategy and Shorting stocks
In 130-30 strategy includes short sales as a significant part of its activities. Speculating for a fall entails borrowing securities from another party, often a broker and agreeing to pay a percentage of the Commission. A negative position is subsequently measured in the investor’s account. The investor sells the newly acquired securities in the open market at the current price and receives cash for the trade. The investor expects securities are falling and then buy them at a lower price. At the moment, the investor returns the purchased securities to the broker. Selling activity from the first purchase and sale of securities, shorting also enables the investor to make a profit.
Short selling is much riskier than investments in long positions in securities; thus, the investment strategy 130-30 Manager will focus on long positions than short positions. Short sale puts the investor in a position of unlimited risk and crowned with reward. For example, if an investor shorts a stock trading at $30, the most she can get is $30% smaller Board, while the most she can lose is infinite, as the stock can technically go up in price forever.
Other forms of investment and trading strategies include arbitration strategy in which investors try to gain from price discrepancies in similar securities.