Shorting the Market (bonds, E-Trade, brokerage, ultrashort)

[cignalife]

How can I short the market using commonly available products like mutual funds, bonds, etc that I would have access to through my brokerage account?

[Malloric]

Trader Mike » List of Inverse ETFs (Short ETFs / Bear ETFs)

[Willy702]

SDS is most commonly used among technical traders.

[Nor'Eastah]

Be VERY CAREFUL shorting this market! At the very least, don't use margin!

[fitz99clem]

Short ETFs involve the use of derivative contracts to garner the desired position for the fund. In many cases, the derivative is set up for daily market moves and can differ signficantly from market direction over a month time frame or longer (theta or vega moves can crush you even if you're right in your market call). I'd recommend staying away unless you've got a strong understanding of derivative contracts. In that case, simply structure the short positon yourself through derivative contracts.

For example, SDS (the ultrashort S&P ETF) was referenced above. It made 20% in 2008 and has lost 75% since. Its 2x inverse S&P move should have had it up at least 60% in 2008. The only winner from these types of ETFs is Wall Street and their ability to rip off retail investors.

[Willy702]

Originally Posted by fitz99clem

Short ETFs involve the use of derivative contracts to garner the desired position for the fund. In many cases, the derivative is set up for daily market moves and can differ signficantly from market direction over a month time frame or longer (theta or vega moves can crush you even if you're right in your market call). I'd recommend staying away unless you've got a strong understanding of derivative contracts. In that case, simply structure the short positon yourself through derivative contracts.

For example, SDS (the ultrashort S&P ETF) was referenced above. It made 20% in 2008 and has lost 75% since. Its 2x inverse S&P move should have had it up at least 60% in 2008. The only winner from these types of ETFs is Wall Street and their ability to rip off retail investors.

SDS and others are short term vehicles, no one should hold these for more than a week and ideally they are best if they are closed out each day.

[BeerGeek40]

DOG -- Proshares short Dow 30. This is all you need. I bouught some recently.

[steven_h]

Originally Posted by cignalife

How can I short the market using commonly available products like mutual funds, bonds, etc that I would have access to through my brokerage account?

There are many ways to short the market.

- The easiest way is to buy inverse ETFs (equity traded funds) based on the group of equities or commodities that you believe will turn down. FAZ (3x financial bear) comes to mind if you want to short financials. I use this ETF to hedge my long positions and if there is a nice dip in the market, I sell covered calls OTM a month or two out.

List of Inverse ETFs (Short ETFs / Bear ETFs)

- You can play naked options which offer the most bang for the buck, but equally higher risk and volitility. You want to make a lot you have to risk a lot. Beware though, your investment could evaporate quickly due to the time factor.

- You can buy long positions in 100 share blocks and as they rise sell covered calls which is the least risky option play and a bull play in a bearish market.

- You can play with complex option spreads which can pay you in either direction and can limit loss in a worse case scenario. The key word here is COMPLEX. You must know what you are doing and have a full grasp of the way these work.

- You can sell the stock short. This is the method that most hedge funds use. You will need to have a margin account (usually $5000min), or enough cash to cover the spreads.

Here is a good explanation of the method:
Short Selling: Introduction | Investopedia

Active Trader: How to Sell a Stock Short - SmartMoney.com


Also look at these sites for guidance on whatever vehicle you choose to play:

Stock Market News & Financial Analysis - Seeking Alpha
ETF Database | ETFdb: The Original & Comprehensive ETF Database

I hope this helps, and may all your plays be winners.

P.S. Shorting the market at this moment might be a hard nut. All indications is that we may be turning back up for a retrace. If Greece comes around, China follows through with their QE, and the US does QE3... the market will pop 10-20% quickly. All of these things are pointing to being done.