Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I've never delved into short selling much since it is not available for IRAs. But recently i've had the desire to run some Excel calculations on shorts, and i've run into a problem.

I'm trying to take daily returns and find out the overall compounded return over some time period as if a position was held short. I thought inverting the daily returns and taking the product of them would give me the return as if the position was held short, but that doesn't seem to be working. I'm getting different values for overall return than if I had simply took the start price and end price and calculated the return from the short position that way. Would anyone happen to have some insight into what i'm doing wrong?

Day 1 price: $10
Day 2 price: $12 (20% return or 0.20)
Day 3 price: $11 (-8.33% return or -0.0833)
A $100 short position: $100/$10 = 10 shares. Buy back at day 3: $11*10=$110. $100-$110= -$10 loss or 10/100 = -10% loss.

But if I invert the return to get: -0.20 and +0.0833, add one to get: 0.80 and 1.0833. Take the product, I get: 0.866 or a -13.4% loss.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.