Long/Short Thesis Framework & Position Construction
Build conviction-scored long/short theses with hedge ratios and stress testing
What You Can Do
You can construct investment theses for long/short portfolios by identifying catalysts, pairing longs with hedges to isolate alpha, quantifying conviction probabilistically, and stress-testing outcomes across market dislocations. The framework produces reproducible, risk-committee-ready documentation that replaces ad-hoc position thinking with disciplined position mechanics and hedge optimization.
Features
Identify specific catalysts, timeframes, and financial inflection points that drive your investment case with testable milestones
Pair long positions with appropriate shorts to reduce systematic risk, isolate alpha, and optimize portfolio construction
Express confidence probabilistically with edge decay assumptions and confidence intervals tied to conviction levels
Calculate beta-neutral, market-neutral, or directional hedge ratios based on correlation, volatility, and portfolio constraints
Model outcomes across market dislocations, regulatory shifts, sector rotations, and idiosyncratic shocks pre-entry
Generate systematic position documentation that survives LP scrutiny and internal risk review
Update conviction, correlations, and hedge ratios when market conditions or thesis developments change
Example Output
Example 1: Long Tech / Short Semiconductor Thesis
Catalyst: AI capex normalization reducing fab utilization below 75% in H2 Long: Nvidia (conviction 7/10, $120 upside) Short: TSMC (conviction 6/10, $85 downside) Hedge Ratio: 1.3x TSMC to beta-neutral portfolio (correlation 0.72, NVDA beta 1.8) Stress Test: If AI spending delays 6 months, position loses $2.1M; if energy costs spike 30%, TSMC shorts gain $1.2M
Example 2: Long Specialty Retail / Short Fast Fashion
Thesis: Inventory normalization drives margin expansion; fast fashion margin compression from excess supply Long: Lululemon (conviction 8/10, margin expansion catalyst Q2) Short: H&M (conviction 7/10, working capital strain) Hedge Ratio: 0.9x for directional beta exposure (isolated apparel retail idiosyncratic risk) Scenario: Recession scenario (-15% consumer spend) results in $800K loss; strong consumer scenario (+10%) yields $2.8M gain
What's Included
- SKILL.md: Complete thesis framework instruction file with catalyst identification, multi-leg structuring, and hedge mechanics
- Thesis Template: Structured worksheet for catalyst, conviction scoring, and timeframe documentation
- Hedge Ratio Calculator: Step-by-step methodology for beta-neutral, market-neutral, and directional calculations
- Scenario Analysis Checklist: Pre-built stress scenarios (recession, sector rotation, regulation, idiosyncratic shocks)
- Risk Committee Presentation Framework: Executive summary structure with conviction decay, downside scenarios, and position sizing rationale
Who It's For
- Hedge fund analysts building new long/short positions with catalyst-driven theses
- Portfolio managers structuring multi-leg strategies and optimizing hedge ratios
- Risk committee members reviewing position construction discipline and stress test rigor
- Junior analysts learning reproducible position construction frameworks
- Institutional investors evaluating hedge fund position quality and thesis documentation
Best For
- New position construction — From catalyst identification through sizing and hedge ratio determination
- Position defense — Preparing systematic documentation for risk committee and LP reviews
- Conviction allocation — Comparing thesis quality across multiple ideas for capital deployment
- Hedge optimization — Recalibrating beta-neutral and market-neutral ratios when correlations shift
- Tail risk modeling — Stress-testing outcomes before entry across regulatory, macro, and idiosyncratic scenarios
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