How to short Nasdaq ETF safely without using a lot of capital if the market were to turn bearish? What is the best platform and instrument to short the US market? - Seedly
 

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Asked by Good Day Every Day

Asked on 15 Sep 2018

How to short Nasdaq ETF safely without using a lot of capital if the market were to turn bearish? What is the best platform and instrument to short the US market?

Shorting US market

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Jonathan Chia Guangrong
Jonathan Chia Guangrong, Fund Manager at JCG Fund
Level 8. Wizard
Updated on 07 Jun 2019

Buy put options, or sell call options on the Etf. Both will achieve roughly the same effect though the obligations and funding amount will differ. Buying puts mean you need to pay to own the option contract, no margin required. If the price of the underlying Etf goes below your strike price, you can sell off the position for profits. Selling calls mean you will receive money to holding the position, though if the price of the underlying Etf rises above your strike price and the option gets exercised by the option buyer, your account will be holding x negative amount of shares, where x equals number of contracts sold times 100. You will need to put up margin with the broker to sell option contracts. One thing about selling calls is that if the Etf price does not go above your strike price upon expiry, the contract expire worthless and you keep the premiums you received. And you can repeat the process. I'm using thinkorswim to trade options and it's quite user friendly.

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Good Day Every Day
Good Day Every Day

15 Sep 2018

What is the commission and how much I need to pay if the option is exercised? Thanks.
Jonathan Chia Guangrong
Jonathan Chia Guangrong

15 Sep 2018

Mm the rates are USD$0.81 per contract plus USD$10.65 for retail investors. Assignment fee is USD16.05. I'm getting a straight USD1++ per strike per contract rate for options, and about the same rate as above for assignments. The lower rates are negotiated as part of a community and the lowest possible here for ThinkorSwim
Gabriel Tham
Gabriel Tham, Tag Team Member at Kenichi Tag Team
Level 9. God of Wisdom
Answered on 15 Sep 2018

Open a Forex brokerage account. There are Index futures that you can short. Capital required is lesser than shorting using CFD brokers.

You can try the following forex brokers: axitrader, IGmarkets, CMC markets.

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No need any fancy options if you just want to have opposite exposure to the QQQ ETF that matchs NASDAQ 100 just get the ProShares inverse ETF (ticker PSQ) which is designed to give daily change same as QQQ but opposite direction.

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