Now suppose you invested $100,000 in the two-stock strategy. What is the rate of return on your strategy? If your strategy involved short selling BOTH stocks then you can invest a maximum of $50,000 in each stock. If you had one long and one short position then you can invest $100,000 in the long position and use that position as collateral to short sell $100,000 of the stock you identified as a short selling candidate. Suppose that the hedge fund only invested $50,000 of its capital due to margin trading. What is the rate of return now?

Using one long, one short

Long position: buying price: 200

Short position: selling price: $100 rebuying price: 50