Stock Market Analysis – 07-01-2010
More jobless claims and plummeting pending home sales should destroy the market, as it did at the start. The semi-recovery at the end was a little surprising, but not unfounded. Sharp moves typically have a bounce, so make sure you have a predefined exit so that you don’t get too jumpy and misfire early. If you jumped in short, you still have a little room on the upside, and if you aren’t in yet, you’re probably thrilled that it’s not overextended yet.
I was asked about using options when shares aren’t available to short. The fact that you were trying to short it in the first place says you aren’t looking to leverage it to the max. In that case, typically buying a straight in-the-money put will match your needs the best. Just buy one that’s not too far out so that you have a high delta, meaning that the option move more closely matches the stock move. That way it’s closer to your original short position where you don’t have to worry about time. You can consider bear spreads if the options are too expensive, but then you’ll have to figure out target prices and timelines.
If you want to get in depth, you should get some options software. Don’t worry, there’s a lot of free stuff out there. Most brokers offer at least something. The ones I’ve used, TD Ameritrade and Options Express have basic things that can help you compare the upside, downside, and timelines of the different options pretty easily. You could also look at something like options oracle, which is also free. Hope that helps.
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