How to Play a Decline in the S&P 500

I do not imagine we will see any tightening of interest rates until the jobs outlook improves. And we are simply not at that point yet. This gives strong credence to those that argue that markets -- not only equities, but commodities as well -- have risen way too far, way too fast. And the day of reckoning will come.

For now, I like short call opportunities in the S&P 500 futures options as I believe that the market's overbought status means the path of least resistance from here will be lower.

One can sell the November 1130 call option that expires in nine days (Nov. 20) for a premium of 3 points ($750.00). In addition, I like the idea of selling the December 1160 call for a premium of 6 points or $1500.00 The December option has 37 days until expiration.

Lastly, for those who prefer to trade futures, I recommend selling S&P futures at or around the 1100 mark with a stop-loss at 1108.

Risk disclosure: Past performance is not indicative of future results. The risk of loss in futures trading is substantial and such investing is not suitable for all investors. An investor can lose more than the initial investment.

-- Written by Matt Zeman in Chicago.

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