Shorting The Market? Consider This First.

From Greg M

Lions…

It appears that some of you are taking up short positions against the market/SP500.

Personally I think shorting the market here carries with it a lot of risk, depending on how you set up your trade of course.

Keep in mind, that we don’t even have a market. Moreover, the Fed can get in here along with other central banks at any time and start to buy debt.

With that.

Here are some basic strategies below which you may be interested in, setting up your trades.

I hope this helps.

GM

The Iron Butterfly

If you are a trader who is somewhat risk-averse, consider the Iron Butterfly strategy. This options structure is less risky but still potentially profitable. This approach to trading is good for generating steady returns on investment with low risk. This strategy helps caps risk, but still offers the ability for a good return on investment.

With the iron butterfly strategy, an investor/trader will sell an at-the-money put and simultaneously buy an out-of-the-money put. To complete this strategy, the trader/investor will also sell an at-the-money call and buy an out-of-the-money call. All options MUST have the same expiration date on the same underlying asset.

Bear Put Spread

A bear put spread is a strategy executed by a bearish investor/trader who wants to maximize profit while minimizing potential losses.

The bear put spread strategy is set up by concurrently purchasing put options at a specific strike price and then selling the same number of puts at a lower strike price. Both options positions are purchased on the same underlying asset and have the same expiration date.

Iron Condor

The iron condor options strategy allows traders to profit in a market that is trading sideways.

To set up the iron condor strategy, an investor/trader simultaneously holds a bull put spread, and a bear call spread. An iron condor is created by selling one out-of-the-money put and buying one out-of-the-money put at a lower strike. To complete this trade, the investor/trader will then sell one out-of-the-money call and buying one out-of-the-money call of a higher strike. All the options positions used to set up this trade must have the same expiration date and are on the same underlying asset.