If you're a retail customer who enters an order online, you probably won't be able to borrow shares, according to my informal survey. The one exception seemed to be through Ameritrade ( AMTD), which executed short sales of 200 TLT shares on the first submission for a $30,000 account. Scottrade did not lend the shares to a $100,000 account. Meanwhile, an individual with a $1 million account clearing through SLK had no problem shorting 1,000 shares. Further up the food chain, a small hedge fund with just under $5 million under management was told by his prime broker that he could short 5,000 shares immediately, but would need time to locate additional shares. Large funds seem to have little problem borrowing a few thousand shares.

Your broker will be more responsive if you get on the phone and talk to a live person. And the more money you have, the more likely your broker is to take your call and provide service. You'll need to check the shares' availability before entering the actual order. However, this should by no means be construed as a recommendation to short these ETFs; it's merely a pulse check. If you do decide to proceed, I'd love to hear from more readers about their experiences, and I'll report the results next week.

Focus on Options

Of course, I'm here to tell you how options can help you avoid all this aggravation. Buying puts on these bond ETFs will create a bearish bet that rates will rise. But to truly recreate a short share position, consider constructing a synthetic short using options. You'd do this by simultaneously buying a put and selling a call with the same expiration date.

For example, with TLT trading at $95, you could buy the July 95 put for $2.50 and sell the July 95 call for $1.70 for a net debit of 80 cents. Essentially, that makes you short TLT at $94.20. The discounted sale price is the cost of the premium paid for the option. If you plan to use a synthetic position, be aware of its limited lifespan and the increased margin requirement of maintaining two option positions. Also, consider the low volume and lack of liquidity in these new ETFs. You might want to use longer-dated options to protect or profit from a change in the overall trend of interest rates.

If you liked this article you might like

The Influence of Option Expiration

The Influence of Option Expiration

Options Mailbag: Short the Transports

Options Mailbag: Short the Transports

Options Mailbag: Not All Merger Strategies Are Created Equal

Options Mailbag: Not All Merger Strategies Are Created Equal

Lehman's Options Plays Suggest Fear

Lehman's Options Plays Suggest Fear

Three Potent Tech Options Plays

Three Potent Tech Options Plays