Cesar Valencia

Commercial Real Estate Loans May Be Next Shoe to Drop

If you don't know how to use options you could just sell them short. Options have many intricacies that might overwhelm the rookie investor. For example, implied volatility will be very high in this uncertain environment so options will be costlier. Put options are contracts that give the buyer the right to sell stocks at a specified price by a specified date. The buyer of the option would then gain on the price of the stock going down. The good thing about options is that you can sell them, so you don't have to keep them until maturity. Call options are just the opposite. The buyer pays for the right to buy the underlying stock at a set price. If stock prices go up, the owner of the option gains the difference between the higher price of the stock and the lower price of the strike price.
Hope this helps a little.

Commercial Real Estate Loans May Be Next Shoe to Drop

Let me take this one step further. If you short both the SRS and the URE you could make some "risk less" money. I mean risk less in the sense that you CRE is supposed deteriorate. Compare the charts of both one year out and you'll see what I'm talking about.

Commercial Real Estate Loans May Be Next Shoe to Drop

A better instrument for shorting commercial real estate is to buy puts on the IYR. Ultra Shorts are not the best instruments to maximize returns. Don't take my word for it, just take a look at the charts comparing the URE, SRS and the IYR.