This segment, for those traders with a directional bias, analyzes eight different choices for shorting the S&P 500 and provides the resulting data from 2.5% and 5% moves down. This will give bears and bulls alike several trading choices.
We may look to take a directional stance on a market depending on our market outlook. The S&P 500 is only few percent off of all time highs so we examined ways to get short the market given varying account sizes and levels of risk tolerance.
There are many strategies for creating short deltas to take advantage of a short bias. We looked at a range of choices that account for both capital requirements and risk tolerance.
A table was displayed showing eight different strategies for shorting the S&P 500. Note that for the Covered Put, we looked to sell the put that was 69% OTM and the Synthetic Short was created by using the ATM Sep strikes. A second table displayed the price and buying power reduction (BPR) on all these short S&P positions.
A table displayed each of these bearish S&P positions after a 2.5% pullback and another table showed the data after a 5% pullbacks in the S&P, assuming a margin account in both cases.. The table showed the price, buying power reduction (BPR), P/L and return on capital (ROC) for each bearish strategy.
Watch this segment of “Options Jive” with Tom Sosnoff and Tony Battista for the takeaways, the eight different strategies used and to see the to find out the strategies compare.
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