Landing the long/short plane with BlackRock's Taotao Cai

Tax-aware long/short strategies boost loss-harvesting but require years of planning to unwind leverage without triggering costly gains.

• Longshore adds gross, not net, exposure: Clients' net market exposure stays the same, but margin and shorting expand gross exposure to pursue pre-tax alpha and generate more tax-loss harvesting opportunities on both sides of the book.
• Options analogy for loss harvesting: Cai frames unrealized gains/losses like option value and cost basis like a strike price, noting volatile securities harvest losses better — mirroring optimal-stopping logic from American option exercise.

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