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Important Disclosures

We execute this strategy at two custodian firms: Interactive Brokers and Schwab. Both custodians offer competitive margin rates vs other custodians. Clients seeking to utilize this strategy will need to sign a margin agreement with the custodian firm.

The primary risks associated with this strategy include the following:

  • Unlimited risk of loss from short selling. Unlike long positions, where losses are limited to the initial investment, the price of a stock sold short can rise indefinitely, potentially causing rapid and unlimited losses. The Burney Company employs various measures to reduce this risk, but losses can still occur.
  • Leverage and margin risk. Long-short strategies use margin to boost exposure, increasing both potential gains and losses. A decline in stock value can trigger margin calls.
  • Tracking error and portfolio risk. There is potential for tracking error due to the performance of our stock selection model. Success depends on the portfolio manager’s ability to choose both winning longs and losing shorts. Poor timing or incorrect analysis can lead to losses on either side. Additionally, in volatile market conditions, the assumed hedge between long and short positions may break down, leaving the portfolio vulnerable to broad market downturns.
  • Costs and tax implications. This portfolio incurs additional expenses, including margin charges, as detailed in the margin agreement. Additionally, closing out positions can lead to significant short-term capital gains tax liabilities that may not be fully offset.
  • Liquidity risks. Some short positions may become difficult to borrow or cover, particularly in volatile markets, making unwinding difficult.

The strategy is intended for sophisticated investors with aggressive or moderately aggressive risk tolerances who understand the strategy's complexity and the unlimited loss potential of short selling.

Past performance is not indicative of future results. All investments involve risk, including loss of principal.

Advisory services are offered through the Burney Company, an investment adviser registered with the U.S. Securities & Exchange Commission. Registration as an investment Adviser does not imply a certain level of skill or training.