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Strategies & Market Trends : Roger's 1997 Short Picks
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To: Carl H. Gotsch who wrote (4445)8/2/1997 10:16:00 AM
From: Jon Tara   of 9285
 
Carl, I was referring to shorting SPY, not buying puts.

SPY is essentially equivalent to the cash SPX. It is a unit trust that holds the stocks in the S&P 500. There is also a mid-cap trust, forget the symbol right now.

Although SPX puts offer leverage and limited loss, they would not be easy to trade in a rapidly-moving market. You would be paying an extremally high premium. Because many brokers do not let you trade options on-line, there will often be the additional delay of calling your broker at the worst possible time to try to call your broker.

SPY can be shorted on a down-tick, and is very liquid. Though it can run ahead of the S&P (it can be a useful leading indicator, like INTCW) arbs will eventually come in and correct it.

SPY is handy to have in your arsenal for those 100-point and more drops. It is the one thing you can reach for in a market decline without thinking. You don't have to worry if it will correlate with the market or not. :) Nor do you have to worry about finding an uptick, nor about liquidity.
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