{03-12} Make 100% profit shorting S&P500

There are 3 ETF charts you need to see:



1. chart of Proshares short S&P500 or SH
http://investing.money.msn.com/investments/charts/?symbol=sh#symbol=SH&event=&BB=off&CCI=off&EMA=off&MACD=off&MFI=off&PSAR=off&RSI=off&SMA=off&FSO=off&SSO=off&Volume=off&period=3m&linetype=Line&scale=Auto&comparelist=$indu,$compx,$inx

2. chart of Ultrapro short S&P500 or SPXU
http://investing.money.msn.com/investments/charts?symbol=us:spxu#symbol=SPXU&event=&BB=off&CCI=off&EMA=off&FSO=off&MACD=off&MFI=off&PSAR=off&RSI=off&SMA=off&SSO=off&Volume=off&period=3m&linetype=Line&scale=Auto&comparelist=$indu,$compx,$inx

3. chart of ultrashort S&P500 or SDS
http://investing.money.msn.com/investments/charts?symbol=us:sds#symbol=SDS&event=&BB=off&CCI=off&EMA=off&FSO=off&MACD=off&MFI=off&PSAR=off&RSI=off&SMA=off&SSO=off&Volume=off&period=3m&linetype=Line&scale=Auto&comparelist=$indu,$compx,$inx

The options
option 1: An example of an option of SH at this link >> http://investing.money.msn.com/investments/etf-options/?symbol=us:SH&month=08&year=2012
Option of SH for August 2012 expiry at strike 38 -> open interest of 495 shows good interest and popularity. Chart of SH also shows good volume.

option 2: An example of option for SPXU at this link >> http://investing.money.msn.com/investments/etf-options/?symbol=us:SPXU&month=07&year=2012
Notice that there are not much open interest so this ETF is not popular to option trader at all.

option 3: An example of option for SDS at this link >> http://investing.money.msn.com/investments/etf-options/?symbol=us:SDS&month=09&year=2012
Option for SDS for September 2012 expiry at strike 17 -> open interest of  6,952 shows tremendous popularity. So we choose this ETF and the related option.

If you had seen SDS with a nice breakout on May 4 2012 (see 3rd chart above) and you bought call:

SDS call option expiry September 2012 at strike 16.
- May 4 premium range of $1.20 to $1.36 with open interest of 2,852 with a volume of 669.
- last Friday's done premium is $2.57 with best theoretical price of $2.41
and that's a more than 100% gain when S&P500 is downtrending.

Of course you can trade the more popular SPDR S&P500 or SPY (http://investing.money.msn.com/investments/charts?symbol=us:spy) but the downtrending pattern makes the average trader fear and not sure what to do.

So when the market is downtrending, you can still make profitable trades by buying the short option of S&P500 ETF of SDS, the more popular S&P500 ETF for shorting. At this time, the uptrending pattern makes you feel nice to trade.