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To: Investor2 who wrote (4651)	4/19/1998 8:56:00 PM
From: MrGreenJeans	Respond to of 42834

Shorting the Indexes Good Question. I believe that shorting the indexes takes a great deal of capital because of the possible / probable associated margin calls that go with shorting any index especially within the context of shorting an S&P financial future for example. For one to short a financial future one must have at least 2 to 5 times the amount of capital on hand in order to cover any margin call. If one guesses wrong on the direction the risk can conceivably be open ended. Or if one guesses correctly but not within the correct time span one can be whipsawed into a bankrupt position. Further, for those on this thread who are understand statistics a three standard deviation move, a move not probable in one's lifetime, occurs more often than the probability table suggests. What this suggests is that if you are short and a three standard deviation move takes place you will be financially ruined. The aforementioned example assumes one is totally short and is not using it as a delta / gamma hedge vs. a long position. Shorting S&P calls for examples exposes one to the same risk. I would recommend using a mutual fund that shorts the index for you as a better way to short the market because in this manner you can avoid receiving margin calls.