Is shorting the S&P 500 a good idea right now?

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qwerty

qwerty

Well-known member
Just wanted to get your guys' thoughts on shorting the S&P 500 using SDS (or something else), the market seems very bubbliscious right now. Ive been thinking of shorting it for a while (thank goodness i havent yet). Its only about 20% below its all time high a couple of years ago, given current economic conditions and the way things look for the foreseeable future (govt spending, higher taxes, etc), it doesnt seem to make a very fertile ground for continued increases for the S&P

This was posted yesterday by John Browne, who is the senior market strategist for Euro Pacific Capital, Peter Schiff's firm

"Today, the S&P 500 trades at 21.6 times current earnings, which is 32% higher than the average over the last 30 years. [03/24/10, multipl.com] With so much economic uncertainty on the horizon, I'm not sure how you make the case that the market is still undervalued. The nature of the recent stock price move appears to be that of a bear-market rally, not a bull-market resurgence. "

Any feedback would be greatly appreciated. thank in advance.
 
Instead of shorting the S&P, you might want to look at selling naked out-of-the-money call options on SPY or SSO (double S&P) or selling naked out-of-the-money put options on SDS (double inverse of S&P).  If you do that, I would HIGHLY advise you to set somewhat tight stop losses just in case.  You can also sell slightly out-of-the-money VIX put options if you think the market is gonna be trending down.
 
morekaos said:
Never step in the way of a train.  At the moment the trend is your friend.
Click to expand...
Very true, but the volume is so thin that things can turn on a dime like they did at 10:30am yesterday morning.
 
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