| ▲ | Galanwe 38 minutes ago |
| > I'd love is some sort of trade that would eliminate my exposure to SpaceX You can just short SpaceX of an amount equivalent to its share of your SP500 holdings. You will have to pay borrowing costs though, but on something that liquid it will be very small. |
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| ▲ | BJones12 30 minutes ago | parent | next [-] |
| Yeah. For comparison, SpaceX will be maybe half the size of MSFT. MSFT is 7.4% of the SP500 index, so for a $1,000,000 portfolio if you were to short MSFT you'd pay 0.25% on the value of that 7.4%, or $185/year. So eliminating SpaceX exposure will cost you $100 per million of your SP500 ETF per year, or so. |
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| ▲ | parliament32 34 minutes ago | parent | prev [-] |
| Shorts have unlimited risk. Buying a put is risk-defined and probably a better strategy. |
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| ▲ | BJones12 29 minutes ago | parent | next [-] | | No, because the unlimited risk of shorting is balanced (hedged) by the unlimited upside of holding the same number of shares via the ETF. | | |
| ▲ | parliament32 5 minutes ago | parent | next [-] | | Yeah you're not wrong. I didn't think about it that way because you can't really break something out of an ETF basket, and you also don't control the ETF basket, but if you think those risks are minimal it's probably fine to just compare dollars-to-dollars. Personally I would still probably go with the long put strategy unless the price difference is exorbitant. | |
| ▲ | jocaal 23 minutes ago | parent | prev [-] | | You cannot however sell only SpaceX shares from your ETF to cover your short's losses. So due to liquidity issues I wouldn't recommend your strategy. | | |
| ▲ | ls612 a minute ago | parent | next [-] | | We aren’t talking about penny stocks we are talking about a tech giant. At the scales that any ordinary investor is operating at there will be no liquidity issues with shorting it and if it is in your index fund the short and long positions will directly offset if you size it correctly leading you to have net zero exposure to SpaceX. | |
| ▲ | Galanwe 16 minutes ago | parent | prev [-] | | What are you talking about? You don't need to touch anything about your ETF. You just have to short a single name on the side. Also there is no liquidity issue, we're talking SP500 names here, you'll pay GC, which should be around 25bps as the other comment mentions. |
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| ▲ | Galanwe 18 minutes ago | parent | prev [-] | | It's not just a short, it's a portfolio of X short + X long. It's effectively canceling perfectly. |
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