I'd be happy to try to explain anything. This doesn't even get into the little "unhedged" word's complexity :)
That's when you start getting into options and derivatives, which are (theoretically) priced on a 5 variable differential equation called "Black-Scholes" (intuitively, you are just buying the right to buy or sell a stock for a particular amount at or by a certain date in the future).
You could construct a trade using those where you would make a smaller amount of money if the price fell, but your losses would be capped above a certain amount. In investing terms, you could buy out of the money calls to hedge your short position, and then your loss would be capped at (price you sold - max(price you have to re-buy at, price you can call your options at plus the option premium). I'll stop there before I get too far out of my league :)
That's when you start getting into options and derivatives, which are (theoretically) priced on a 5 variable differential equation called "Black-Scholes" (intuitively, you are just buying the right to buy or sell a stock for a particular amount at or by a certain date in the future).
You could construct a trade using those where you would make a smaller amount of money if the price fell, but your losses would be capped above a certain amount. In investing terms, you could buy out of the money calls to hedge your short position, and then your loss would be capped at (price you sold - max(price you have to re-buy at, price you can call your options at plus the option premium). I'll stop there before I get too far out of my league :)