How to short the S&P using options? Day & swing puts

Discussion in 'Options' started by KCalhoun, Sep 11, 2021.

  1. KCalhoun


    I know very little about options, I'm a veteran stock day trader.

    What's the simplest way to short the S&P for day trading and swing trading with options?

    I'm assuming buying puts, but I don't know the details of how round trips work. Thx for any tips..
    Emariezzz9 likes this.
  2. Learn the basic terminologies, first. Call options = betting up. Put options = betting down.

    Second, it's easier to explain, and self-learn, if you kind of just tinker around the Options section/ordering and graphs and chains area of your brokerage account.

    Third, you mentioned you want to day trade options...that's basically the same as day trading stock, which you're a veteran of.

    Round trips...what's that? Sounds like airplane, airport, terminology. You Open a position, and Close a position with options.

    It's all very easy to learn, don't get confused or intimidated.

    Options are generally, traditionally, used as protect/hedge a portfolio from major, unexpected, swings.
    But, modern day, traders...basically use options to trade them for nice gains like being in a casino.

    Proceed with Caution, though, gains can easy come...and easy go, in the wrong, amateur, hands.
    If you are not good at trading the stock, don't trade options. Options will only greatly amplify the erraticness of your account.

    If you know how to guess and trade the future correctly...options can be your best friend and coolest thing ever.
    If you don't know how to guess and trade the future correctly...options can be your worst enemy.
    Last edited: Sep 11, 2021
  3. cesfx


    There are a lot of layers and dimensions with options as they are not linear like "delta 1" spot trading, and you are trading the greek intricacies of a complex contract more than you are trading raw price.

    I am self-thought and not professional, but I will attempt to answer your question in a simple way, although there is more to it.

    Single legs might be considered if you are aiming for high RR, although your risk of decay/depreciation is higher, some find them better for intraday fast action.
    You could buy a put Out of the Money (OTM), @4200... or @4000, (or @ 4400 if you are day trading) if you are aiming for a jackpot sort of return, but you are exposing yourself to decay and slow appreciation due to low delta at inception.

    Or you could buy At the Money (ATM), for a higher delta, so a faster rate of change in dollar per dollar move, usually about 0.5, a bit more expensive in premium vs the OTM. With single legs you have limited risk, unlimited potential reward. Actually limited with a put, but the limit is underlying at 0.

    My choice would probably be a more balanced Vertical put spread, (buy put @ 4450 + sell put @ 4430) for a sort of 1:1 RR...
    Those are limited risk, limited profit potential.

    If you are aiming for higher rr with a spread, you could move it out of the money, like buy put @ 4400 + sell put @ 4350.

    Spreads will also balance some of the greeks compared to single legs.

    You will also have to consider the instrument you are trading, if it's cash settled like SPX (European style options), of if it could be excercised like stocks and ETF (American style options).
    If you expose yourself to assignment, you want to have enough margin to afford the underlying.
    Last edited: Sep 11, 2021
    longandshort, jys78 and KCalhoun like this.
  4. Pekelo


    Beside options when you have to time it right, because when you buy a put time works against you, you could just short futures or go long on inverse indexes. Then you get more leverage, but you have the luxury of waiting for the drop.
    KCalhoun likes this.
  5. KCalhoun


    Many thanks, very helpful!
  6. qlai


    How do you trade them?
  7. bdennis


    If you are looking to get more of a linear return as you do with stock or futures then look to use higher delta options (i.e. 75, 80, etc delta). If you have a solid understanding of options and are looking for more of a non-linear payoff then look at 50 or lower delta options.
    Axon and KCalhoun like this.
  8. newwurldmn


    not worth it for what you do.

    you pay wider bid/offer won’t monetize the gamma/theta/Vega and will get less delta exposure.

    and you will be trading bigger size than you are accustomed to.
    longandshort, taowave and KCalhoun like this.
  9. qlai


    Why not? What about (near) ATM weeklies on high range stocks like TSLA?
  10. KCalhoun


    I'm trying to figure this out.....

    S&P average daily range recently looks like 40. How would I trade using options if I think it'll drop that much in a single day? eg buy daily put premkt with atr-based strike?

    Options newb....

    The goal is to be able to bet on the market going short for a daytrade. Clueless on how.

    What's the simplest way to use options to short the market at the start of the day and be flat at the end of the day?

    Last edited: Sep 11, 2021
    #10     Sep 11, 2021