China Growth Stocks

[Drexion2004]

I don't short very often but when I do, using options on hard-to-borrow securities can be a very handy tool.

Personally I tend to prefer shorting via selling deep-in-the-money calls (naked calls) when a security is hard to borrow against and it has a high time-premium on the options. No risk of forced-buy-in and no borrow-fee charges are very nice bonuses over regular shorting.

The method above is closer to an actual short position than buying a put (Same unlimited upside risk, no time premium to pay, etc)...

Whereas with a put you pay a time/volatility premium and have to worry about an expiration date -- but on the bright side you only have a limited capacity for loss (ie: 100% of put value). Margin maintenance requirements also tend to be less with this strategy.

Keep in mind that many brokers require a high "options level" to allow you to sell naked calls. The margin maintenance required by the broker may also vary depending on your "options level".

-Fernando