I have a strategy that may require me to take short positions in a stock and cover that position the next day. Because of the uptick rule, I am considering using options (buying puts) as a possible alternative to shorting the stock. What do you guys think about this? Does this seem reasonable given my intended holding period? I am concerned about the effect of volatility on the put, but I'm not sure how concerned I should be since I will only be holding the position for a day. I'm also not sure as to what types of puts would work best. My initial thought was to buy ITM puts because of the high delta, but maybe ATM (or even OTM) puts would work. My knowledge of option trading is limited and any advice, thoughts, or suggestions would be greatly appreciated! Thanks!
The main problem will likely be the wide spreads on options. Unless you get a decent move, those spreads will really eat into your profit. Deep ITM options will act the most like stock, but they will also carry the biggest spreads.