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Message
How to get short when shorting is illegal?
Posted on 9/19/08 at 8:06 am
Posted on 9/19/08 at 8:06 am
We are a smart bunch of people here. Making shorting illegal is a set-up up for a crash, and I want to be short for a crash. So, we need to figure out how to make money from a crash that doesn't involve shorting stocks. I haven't thought about it yet, but I will on the way to work. This will be the official thread for ideas of how to make money on a crash without being able to short.
Posted on 9/19/08 at 8:12 am to Colonel Hapablap
I got mad IT skills - we could hack an exchange, kinda like in Office Space... just sayin...
Posted on 9/19/08 at 8:18 am to Colonel Hapablap
Can you still buy SRS, QID, etc? Those ETF's are going to obviously get hammered today. Who knows how they are going to do in this rigged casino. The government definitely isn't done playing games. I feel like I am watching the refs of an LSU-Auburn game.
Posted on 9/19/08 at 8:37 am to Colonel Hapablap
check out the spreads on put options.
Posted on 9/19/08 at 8:47 am to Colonel Hapablap
ok, apparently inverse ETFs will work - they use something called "total return swaps" instead of shorting.
Posted on 9/19/08 at 8:47 am to tigerskin
quote:
Can you still buy SRS, QID, etc?
trading halted on SKF...not sure about others
Posted on 9/19/08 at 8:48 am to Colonel Hapablap
Put options is all I can think off, unless you can find something that is inversely correlated to what you want to sell and go long in it. But I can't think of what that is?
ETA: Ok, not only am I too slow to post, but I'm severely out-knowledged on this subject.
At least I can make up words.
quote:
ok, apparently inverse ETFs will work - they use something called "total return swaps" instead of shorting.
ETA: Ok, not only am I too slow to post, but I'm severely out-knowledged on this subject.
At least I can make up words.
This post was edited on 9/19/08 at 8:51 am
Posted on 9/19/08 at 8:53 am to Colonel Hapablap
I'd have to go back to my notes to remember exactly what it was, but I think with some combination of a call and a put you can create a "synthetic" short position.
Posted on 9/19/08 at 8:58 am to GeneralLee
quote:
I'd have to go back to my notes to remember exactly what it was, but I think with some combination of a call and a put you can create a "synthetic" short position.
Long put; short call.
Posted on 9/19/08 at 9:03 am to bendellee
quote:
Long put; short call.
Yep, that's what I was thinking. Didn't want to put my foot in my mouth though. Thanks.
Posted on 9/19/08 at 9:32 am to GeneralLee
the spreads on put options are completely crazy right now. Looking at what I own:
Citi put - $2 spread
Capitol One put - $1 spread
Russel 2000 put - $0.75 spread
Earlier this morning, mu russel 2000 and spy puts were both no-bid.
Citi put - $2 spread
Capitol One put - $1 spread
Russel 2000 put - $0.75 spread
Earlier this morning, mu russel 2000 and spy puts were both no-bid.
Posted on 9/19/08 at 10:21 am to Colonel Hapablap
it appears that you can still directly short futures. So, if your brokerage supports it, you're still OK there.
Posted on 9/19/08 at 10:34 am to Colonel Hapablap
per schwab, their is a specific list of 799 financial stocks you are not allowed to short...maybe others are still fairplay and I imagine that SKF practiced the shorting of these stocks, hence the halting of trading for that ETF while other inverse ETFs are still fair game
quote:
Urgent Notification
SEC Bans Short selling on 799 Financial Stocks
The Securities and Exchange Commission, acting in concert with the U.K. Financial Services Authority (FSA), today took temporary emergency action to prohibit short selling in financial companies to protect the integrity and quality of the securities market and strengthen investor confidence. The action is immediately effective. All open orders to short any of these 799 stocks will be canceled. Please refer to www.sec.gov for in-depth details of the order.
Posted on 9/19/08 at 11:20 am to Colonel Hapablap
quote:
We are a smart bunch of people here. Making shorting illegal is a set-up up for a crash, and I want to be short for a crash. So, we need to figure out how to make money from a crash that doesn't involve shorting stocks. I haven't thought about it yet, but I will on the way to work. This will be the official thread for ideas of how to make money on a crash without being able to short.
Here's a position that is sort of like a short position:
LONG 100 Shares XYZ
SHORT 1 XYZ CALL at a very low strike price
LONG 1 XYZ PUT at a very high strike price
The strike prices are chosen so the proceeds from the sale of the call pay for the put.
So, as an example, say you buy 100 sh XYZ at $5.00 a share, sell a call for XYZ at a strike of $3.00 and use the proceeds to buy a put for XYZ at $7.00 strike.
If the final price falls in between 3 and 7 bucks, both the call and the put are in the money. (7 - V) + (3 - V) + V - 5 = 5 - V
So if the final price falls in between 3 and 7 -for a dividendless stock, the result is the same as if you had shorted. For a stock that pays dividends - since you actually own the underlying, you'll be receiving them instead of paying them.
If the final price falls below 3, (7-V) + V - 5 = 2
Above 7 => (3-V) + V - 5 = -2
So unlike a true short position, your loss and gain are limited.
Its counterintuitive that you can mimick (though not precisely) a short stock using a position that has a long stock in it. The way I think of it though, is that the short call and the long put are both contracts, which if both are exercised, result in you selling the stock. So the two options represent 2 sales and the long position represents 1 purchase = 1 net sale.
This post was edited on 9/19/08 at 11:23 am
Posted on 9/19/08 at 11:26 am to Colonel Hapablap
quote:
k, apparently inverse ETFs will work - they use something called "total return swaps" instead of shorting.
Yeah, except that if the company they bought the swaps from goes under, the swaps don't get paid.
Posted on 9/19/08 at 11:27 am to ArkansasDon
see my post about put spreads earlier in this thread. Put options are not working real well right now.
Posted on 9/19/08 at 11:29 am to Colonel Hapablap
CNBC says GE is getting added to the list. Don't know why they're stopping there
Posted on 9/19/08 at 11:52 am to Colonel Hapablap
quote:
How to get short when shorting is illegal?
see my post about put spreads earlier in this thread. Put options are not working real well right now.
What do you mean when you say citi is $2 a spread?
Does this mean the put options are mispriced, and if that's true, wouldn't there be opportunity for risk free gains above treasury returns?
Posted on 9/19/08 at 11:55 am to ArkansasDon
I haven't looked since then, but at the time it meant that the Jan 09 25 put could be bought for $x, but could be sold for $(x-2). Essentially, if you bought 1 contract, the underlying didn't move at all, and you decided to sell, you'd be losing $200, or about 30% on that particular contract.
Posted on 9/19/08 at 11:58 am to Colonel Hapablap
Oh, OK, I got confused I didn't know you mean a bid/ask spread I thought you meant an actual option spread.
Why is it that high?
Why is it that high?
This post was edited on 9/19/08 at 11:59 am
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