Re: Shorting subprime: MBS, REITs, title companies, home builders
I don't know if it is too late to short these or not, but I certainly don't think there is much upside to them in the short term. Just remember, something doesn't have to go up or down to make money, using options, sideways can be a profitable direction.
Example: XHB the homebuilder ETF is currently trading at 22.59. I could currently sell the Nov 24/25 call spread for .25. I would be risking .75 to make .25 and there is 18 days left on that contract.
If XHB closed at $24.00 or lower, I would make 25% on my money. Doesn't matter if XHB goes all the way down to 0, as long as it is below 24.00 on expiration, I would make 25%. The breakeven on this position would be XHB closing at $24.25 and if it closed anywhere above $24.25, i'd be in a losing position.
Not a recommendation, just a trade i've been keeping my eye on.
Edge
I don't know if it is too late to short these or not, but I certainly don't think there is much upside to them in the short term. Just remember, something doesn't have to go up or down to make money, using options, sideways can be a profitable direction.
Example: XHB the homebuilder ETF is currently trading at 22.59. I could currently sell the Nov 24/25 call spread for .25. I would be risking .75 to make .25 and there is 18 days left on that contract.
If XHB closed at $24.00 or lower, I would make 25% on my money. Doesn't matter if XHB goes all the way down to 0, as long as it is below 24.00 on expiration, I would make 25%. The breakeven on this position would be XHB closing at $24.25 and if it closed anywhere above $24.25, i'd be in a losing position.
Not a recommendation, just a trade i've been keeping my eye on.
Edge