Summary

Managing a long/short portfolio feels like upgrading from a family SUV to a sports car. Without proper training, people tend to take their shiny new toy for an off-road spin. In this chapter, we looked at the major levers to engineer the returns you need to attract the clientele you want. Those are gross exposure or leverage, portfolio heat or open risk, net exposure or directionality, net beta or residual sensitivity to the market, and concentration or the net number of names in the portfolio. Those variables give access to volatility, performance, correlation, and liquidity as in market impact.

Over the next chapters, we will take you through a step-by-step method to build an equities long/short product. We will use a powerful technique to reclassify stocks in a bullish, bearish, sideways regime. From there, we will discuss execution: entries, exits, order prioritization. We will conclude with a portfolio management system, the most underrated tool. But first, let&apos...