Asymmetric Investment Returns is a blog authored by Mike Shell since 2006, covering topics about asymmetric investing and trading for asymmetric risk/reward in pursuit of asymmetry.
A robust asymmetric trading system isn’t one that just works; it’s one that reliably produces asymmetry across different market conditions while maintaining an edge. Positive expectation, repeatability, and adaptability.
Weakening trend strength, the expiration of massive options positions, and looming systematic flows have created an asymmetric risk-reward setup where downside risks outweigh near-term upside potential.
Goldman Sachs' latest Hedge Fund Trend Monitor offers a deep dive into the positioning of 695 hedge funds, managing $3.1 trillion in gross equity positions. The report reveals key shifts in hedge fund strategies at the start of 1Q 2025, highlighting selectivity in sectors, thematic rotations, and increasing leverage.
Many investors believe they are pursuing asymmetric opportunities when they buy stocks they think are undervalued or have more upside than downside. But true asymmetry isn’t just about perceived valuation gaps—it’s about structuring risk in a way that limits the downside while allowing for uncapped or asymmetric upside.
In analyzing the Communication Services Select Sector Index for asymmetric risk-reward, the chart illustrates recent strength as the price has pushed beyond the upper boundary of the upward channel. This breakout signifies robust buying interest, though it may also indicate the index is overextended.