Imagine you are an asset manager of an Australian equities...

Imagine you are an asset manager of an Australian equities portfolio.

Due to market uncertainties for the next six months, the higher ups have sent you an IM to trim exposure by 10% for certain commodities including copper.

You look at your substantial pile of HGO shares. You could:

A. Sell 10% of the shares, cystalize unrealised gains, trigger change in holdings announcements, and may have to repurchase the shares back at an unknown price in the future when market sentiment improves.

B. Short 10% of the shares. As shorts hold a -1 delta to exposure, it will satisfy the target asset allocations. Long gain discounts are kept and if the FUM increases, it is more economically viable to liquidate shorts than on-market purchases.

Against public perception, the use of short positions here are not a to "instill fear" or bet against the stock. It is merely a more effective financial instrument given the circumstances.