Short the SPY's or SP 500 futures?

Discussion in 'Trading' started by billpritjr, Oct 19, 2005.

  1. Which to short? Why?

    SPYders or the mini SP 500 futures contract?

    (assuming we are seeing the beginning of a new bear market)

    $50,000 cash account.
  2. Lucrum


  3. New bear market, why do you think this?
  4. lots of distribution days in indexes, plus overall fundamental/monetary climate, plus technical indicators
  5. this was the tip off. distribution, lol.
  6. I apologize if I'm way off here, because I have very little experience in either market.

    I think that the Spyders would be better for a longer-term position because there's no rollover and therefore cheaper but the futures would offer more leverage. Those are the only two real differentiating points I can think of.
  7. buy the inverse *2 Bear Profund

    A mutual fund that tracks the sp or the nasdaq *2.

    this way you get some more leverage like the futures but lesser volatility.
  8. You sometimes have to pay out divis if you short SPY overnight.

    Also leverage is much better with ES.
  9. first, i'll preface this recommendation by saying this is probably a terrible point to go short, and a great time to go long. evidence is pointing to a short term bottom here.

    but if you're going long term short here (multi-year) i would, in agreement with the previous poster, recommend a rydex or profund leveraged account. this is because you can't lose more than your principal, and they can be further leveraged by margining them for an additional short sale after a month's time. plus holding them a year plus will let push you into the long term cap gains margin, and save you a bundle on taxes. you'll get whacked with a high mutual fund fee, but its worth it if you intend to hold for a while.

    going short a futures contract will be taxed as both a short term and long term gain should you profit from this trade.

    shorting the market via spyders or cubes is, in my opinion, the worst idea in terms of taxes. you'll pay always pay the high short term cap gains taxes, because you don't own the shares when you short, you borrow them.

    good luck
  10. Nice post. I myself use Rydex bear instruments for IRA clients and personal accounts.
    #10     Oct 19, 2005