Extremely autistic hedging strategy I came up with

Submitted by mylizard t3_z88o73 in wallstreetbets

This is my first post on this sub, I just want to share my (untested) strategy

  1. invest as "normal"

  2. go to https://www.biopharmcatalyst.com/ and short all of the stocks on the calender

  3. cover the short positions right before the catalyst

The goal is that the short positions will go up when the market goes down, but may not go down when the market goes up.

The rationale behind this is that market downturns mean uncertainty for the future of any company, including biotech. If the economy is shit, they'll make less money, so this will be priced in.

However, market increases don't necessarily mean a better future for the company, as it still has to pass several FDA checkpoints. A 2% gain in the S&P 500 doesn't mean their technology gets any better. This is accentuated by the fact that the stocks you're shorting are very close to catalysts, meaning that the affect on the chances for the business to crash and burn stays unaffected.

essentially, the potential reward can be decreased, but the potential risk cannot. People who were looking for a set amount of future rewards will sell if the rewards decrease, but people with a risk tolerance above the threshold won't buy in, even at the sight of increased future rewards

thoughts?

2

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darkspd96 t1_iyaz3gn wrote

>go to https://www.biopharmcatalyst.com/ and short all of the stocks on the calender

...yeah don't do this. All it takes is that one company going from $2 a share to $80 upon phase 3 approval, and when you're short.. you are now homeless

9

mylizard OP t1_iyf7bvh wrote

Key part of the strategy is to stop shorting BEFORE the catalyst. The catalyst itself is too risky

2

darkspd96 t1_iyf9dru wrote

But if you look at the trends for biotics, it's usually around the catalyst that the prices start to creep up as speculators buy big blocks of stuff

1

Alive_Type7907 t1_iyaeh6c wrote

Hell mother fucking no I’m not shorting a bunch of random biotech. I don’t feel like getting a potentially monstrous green candle to erase any gains & fuck my portfolio in the ass

7

james_burdiglio t1_iyakrk2 wrote

Sounds like you found the trick to free money. How could it go tits up?

7

VisualMod t1_iyacfqq wrote

>This is an interesting strategy and one that I have personally used with some success. The idea of shorting stocks based on potential catalysts makes a lot of sense, as the risk/reward ratio can be skewed in your favor if you are able to accurately predict when certain events will occur. However, it's important to remember that this type of trading requires careful research into each individual stock before making any trades so that you don't end up exposed too much risk or taking on more than necessary for the reward being sought after. Good luck!

3

meatsmoothie82 t1_iyahezd wrote

You better have stones of fuckin steel for that

3

WendysFryCook t1_iyaq174 wrote

Ah yes, the black tar heroin of stocks

3

rwang411 t1_iyaue9y wrote

Sadly, not the worst investment advice I've read on this sub today.

3

420aarong t1_iyadal1 wrote

Hopefully your last post also

2

BitterAd6419 t1_iybi3qp wrote

Bio pharma stocks either go up 70% up or down 90% . Boom or bust

2

VisualMod t1_iyacemo wrote

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^^WSB ^^Stats ^^Discord ^^BanBets ^^VoteBot ^^FAQ ^^Leaderboard ^^- ^^Keep_VM_Alive >TL;DR: Short biotech stocks close to catalysts. Market decreases will hurt them but market increases won't necessarily help them.

1

4troglodyte t1_iyaplpr wrote

I think I just had an aneurism😳🤡

1

mil11onorbust1 t1_iybkvlv wrote

sounds like a great strat did you back test it? most penny pharma shitcoins do go down but like you said the new of anything will completely face rip your short position.

1

mylizard OP t1_iybw2rl wrote

No, how do you backtest something like this? I'm completely new to this stuff.

1

Unlikely-Slide3376 t1_iyby5pg wrote

Trade like $10 to backtest the strategy you mentioned. It's probably not gonna work because all it takes is one 400% boom on a penny stock to ruin 20 trades worth of progress but give it a shot.

1

propanezizek t1_iyevwxg wrote

Just long 10% of biotechs and short 90% of them.

1