10 Reasons to Use ETFs When Trading Options
Michael Shulman, February 7, 2009
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If you want to maximize volatility, puts and calls on ETFs are the way to go. A 3% drop in the Dow Jones Financial Index equates to a 6% gain in the ProShares UltraShort ETF (SKF) which, in turn, would probably generate a 40%-75% gain in selected calls for that ETF. Not bad for a 3% move in the index, far more than you would get if an individual bank stock went down 3%.
Recently double short ETFs have diverged significantly from their underlying indices. For this reason they are not being recommended.
And here are five reasons why buying puts and calls on ETFs can be more profitable than options on stocks or entire market indices.
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