NEW YORK (TheStreet) -- SDS is not the trading symbol for "Students for a Democratic Society." Well, SDS was the abbreviation for that left wing, late 1960s antiestablishment organization. But things changed over the decades, and many people now think of the ProShares UltraShort S&P 500 ETF (SDS) when they hear "SDS." Things change, except that I have yet to vote for anyone left of center.
When I was making markets, one rule I adhered to was to never short (or spread short) any option that I thought was "cheap". In fact, if it felt cheap I wanted to own it. And, shorting theoretically cheap spreads is not the recommended path on the road to riches. What a concept.
SDS call options are cheap relative to how fast things can and do change today, and most of the time that rapid change is from good to bad and not vice versa.
That dynamic is such because stocks go down in price much faster (higher volatility) than they go up in price, which is no secret for options traders. And that fact is especially not missed by those shorting cheap premium!
SDS calls can be considered hedges due to fact that they rise in price as the S&P 500 falls in price. That relationship is multipled by 2, because the SDS is a double-inverse ETF. The following chart illustrates that inverse relationship.