Dan Sundheim: Shorting Against Aggressive Retail Gamblers

In his latest interview at Sohn 2021, D1 Capital’s Dan Sundheim discussed the difficulty of shorting in a market where retail investors are aggressively gambling on stocks. Here’s an excerpt from the interview:

Sundheim: From a risk management standpoint I think that anybody who’s transacting in the market with a completely different strategy that I’m doing should be good for me right.

Because if I’m playing football and you’re playing basketball I can play my game, you play your game but your game should give me opportunities. If people are gambling on stocks and not paying attention to long-term fundamentals that should be good.

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But the gambling creates really excess volatility you just have to be aware of and be careful of, especially on the short side.

Host: So it’s created excess volatility but that’s mostly good in kind of a Mr Market sense.

Sundheim: Yeah, I don’t have anything against retail investors betting or whatever. I can’t imagine on average it’s gonna be an amazing return if you’re day trading or buying options on you know things one week out. You’re eventually probably going to lose but for my business in particular it just means we have to size shorts a little bit differently and just be aware that there are players in the market who are quite aggressive and playing a different game.

You can watch the entire discussion here: