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When Shorting Real Estate goes Bad

Submitted by Frank Lara Jr on Wed, 12/03/2008 - 17:22.
in
Housing and Money

Had you bought the ProShares UltraShort Real Estate (ETF) (NYSE:SRS) the Friday before Thanksgiving, you would have paid in the $250 range for one share, today the price is at $134, a 40% drop in just 8 trading days.

The ProShares UltraShort Real Estate (ETF) (NYSE:SRS) is a standard ETF play for those shorting the real estate sector, what better way to do that, rather then risk it all on one company. 

The UltraShort Real Estate ProShares (SRS) seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Real Estate Index.  Just take a look at the SRS in the last 3 months, and in the last few weeks, it's been out of control.

Since October the SRS has traded between $100 to $250 a share:
Chart for UltraShort Real Estate ProShares (SRS)

Why such massive swings? The investing word of 2008 - volatility.

House Prices and Your MoneySo could shorting real estate be a thing of the past?

Today's story on MarketWatch.com would make you think shorting real estate may be a thing of the past:
U.S. homes now undervalued, economists say.
Prices fall in 241 metro areas in third quarter, and are likely to fall further

WASHINGTON (MarketWatch) - The U.S. housing market is now slightly undervalued after rapid price declines have overshot fundamentals, economists for IHS Global Insight said Wednesday.
House prices fell at a 6.9% annual pace nationwide in the third quarter, with prices falling in 241 of 330 metropolitan areas. Prices are down 6.5% from their peak in 2007.

Compared with their long-term fundamental values, U.S. homes are now 3.8% undervalued, the economists said.

"With no end in sight to the downward spiral of house prices, it is likely that the long-anticipated market correction will now overshoot fundamental valuations on the downside," said James Diffley, head of regional economics at Global Insight.

"Weak economic conditions and wary consumers continue to hold the housing market back," said Jeannine Cataldi, senior economist in charge of Global Insight's regional real estate analysis. "Although many areas are seeing home sales increase, it is largely due to foreclosure homes being snapped up at significantly discounted prices. As the inventory of these homes is removed from the market, prices will remain on a downward path."

However, another economist said home prices are still too high in many bubble areas.

Its anybody's guess, but the majority of America expects things to get worse before they get better, so how do you play it?

You can always buy Options on the ProShares UltraShort Real Estate (ETF) (NYSE:SRS), but get ready to page down, the Calls and Puts can be bought at Strike Prices from $60 to $420, it's unbelievable.

Gentlemen, place your bets, these are just the Options that expire on the 19th:


View By Expiration: Dec 08 | Jan 09 | Apr 09 | Jul 09


CALL OPTIONS Expire at close Fri, Dec 19, 2008

Strike Symbol Last Chg Bid Ask Vol Open Int
60.00 SRSLU.X 84.40 0.00 54.10 57.00 1 14
65.00 SRSLS.X 69.00 0.00 49.00 51.40 22 22
70.00 SRSLR.X 90.00 0.00 43.00 45.60 12 22
75.00 SRSLX.X 61.00 Down 13.00 39.70 42.00 3 57
80.00 SRSLH.X 38.00 Down 18.00 35.90 38.80 2 64
85.00 SRSLG.X 40.00 Down 7.00 32.00 34.20 3 17
90.00 SRSLL.X 29.00 Down 15.00 28.60 30.80 20 41
95.00 SRSLQ.X 30.00 Down 24.40 24.80 26.40 34 56
100.00 SRSLV.X 24.00 Down 9.00 23.10 25.10 113 126
105.00 SRSLA.X 23.40 Down 15.20 21.30 23.10 80 88
110.00 SRSLF.X 20.60 Down 11.40 19.00 20.70 70 180
115.00 SRSLB.X 18.00 Down 7.50 17.00 18.00 19 103
120.00 SRSLC.X 16.50 Down 6.20 16.10 17.60 208 334
125.00 SRSLD.X 15.00 Down 5.90 14.60 15.80 145 212
130.00 SRSLE.X 13.60 Down 5.40 14.40 14.80 216 507
135.00 SRSLZ.X 12.60 Down 6.20 11.90 13.30 192 273
140.00 SRSLJ.X 12.50 Down 4.50 11.50 12.50 402 446
145.00 SRSLW.X 10.50 Down 5.00 10.80 11.90 107 166
150.00 SRSLT.X 10.10 Down 4.50 9.70 10.70 236 661
155.00 SRSLY.X 10.22 Down 6.28 9.40 10.40 97 300
160.00 SRSLI.X 9.30 Down 3.20 9.00 10.00 137 348
165.00 SRSLM.X 9.00 Down 3.60 8.20 9.00 47 228
170.00 SRSLN.X 8.00 Down 4.00 7.90 8.90 221 545
175.00 SRSLO.X 7.50 Down 3.40 7.20 8.10 125 811
180.00 SRSLP.X 7.30 Down 2.20 6.90 8.00 895 926
185.00 SKRLQ.X 7.30 Down 4.30 6.50 7.60 109 568
190.00 SKRLR.X 8.50 0.00 6.10 7.20 15 205
195.00 SKRLS.X 6.00 Down 4.30 5.80 6.90 51 230
200.00 SKRLT.X 6.00 Down 1.60 5.60 6.50 492 1,501
210.00 SKRLB.X 5.60 Down 3.20 5.00 6.00 23 448
220.00 SKRLD.X 7.40 Up 0.40 4.20 4.90 33 247
230.00 SKRLF.X 4.50 Down 1.30 3.80 4.70 117 368
240.00 SKRLH.X 5.00 0.00 3.50 4.50 10 182
250.00 SKRLJ.X 4.70 Up 0.40 3.20 4.10 534 834
260.00 SKRLL.X 3.20 Down 2.30 2.85 3.70 32 150
270.00 SKRLN.X 3.10 Down 0.10 2.50 3.20 99 195
280.00 SKRLP.X 2.75 Down 0.10 2.50 3.20 374 1,744
290.00 SKRLU.X 2.00 Down 1.00 1.95 2.50 74 186
300.00 SKRLV.X 2.30 0.00 1.70 2.35 309 1,196
310.00 SKRLW.X 2.40 Up 1.90 1.60 2.20 3 39
320.00 SKRLX.X 1.80 0.00 1.50 2.15 6 109
330.00 SKRLY.X 2.25 Up 0.75 1.50 1.75 23 19
340.00 SKRLZ.X 1.35 Down 0.30 1.20 1.80 51 198
350.00 SKRLA.X 0.90 0.00 0.95 1.55 20 295
360.00 SKRLC.X 1.90 Up 0.40 0.85 1.40 1 95
370.00 SKRLE.X 1.10 Down 0.15 0.75 1.05 5 173
380.00 SKRLG.X 1.00 0.00 0.65 1.20 6 110
390.00 SKRLI.X 0.90 Up 0.10 0.50 1.00 46 651
400.00 SKRLK.X 0.70 0.00 0.40 0.95 1 13
410.00 SKRLM.X 0.50 0.00 0.40 1.00 18 29
420.00 SKRLO.X 0.60 Up 0.10 0.40 1.30 55 276

PUT OPTIONS Expire at close Fri, Dec 19, 2008

Strike Symbol Last Chg Bid Ask Vol Open Int
60.00 SRSXU.X 0.05 Down 0.35 0.05 0.35 1 90
65.00 SRSXS.X 0.60 0.00 0.05 0.50 24 109
70.00 SRSXR.X 0.65 Up 0.15 0.60 0.75 25 429
75.00 SRSXX.X 1.00 Up 0.10 1.05 1.20 107 332
80.00 SRSXH.X 1.60 Up 0.30 1.65 1.85 32 913
85.00 SRSXG.X 3.00 Up 1.20 2.80 3.20 432 668
90.00 SRSXL.X 4.60 Up 1.70 4.30 4.90 268 1,191
95.00 SRSXQ.X 6.00 Up 1.80 6.30 7.00 48 212
100.00 SRSXV.X 9.10 Up 3.10 8.70 9.40 221 826
105.00 SRSXA.X 11.40 Up 4.80 11.40 12.40 142 433
110.00 SRSXF.X 14.60 Up 5.00 14.30 15.10 284 685
115.00 SRSXB.X 18.30 Up 5.90 17.90 18.90 138 663
120.00 SRSXC.X 21.00 Up 6.00 21.20 22.30 172 1,325
125.00 SRSXD.X 24.20 Up 6.80 24.40 25.50 118 881
130.00 SRSXE.X 28.80 Up 7.40 28.80 29.90 142 333
135.00 SRSXZ.X 33.60 Up 7.80 32.50 33.80 110 276
140.00 SRSXJ.X 37.50 Up 12.90 35.90 37.70 190 196
145.00 SRSXW.X 35.62 Up 11.12 41.00 42.30 26 156
150.00 SRSXT.X 43.50 Up 5.40 44.60 46.00 30 417
155.00 SRSXY.X 44.10 Up 11.00 49.60 51.00 13 112
160.00 SRSXI.X 46.20 Up 5.20 53.80 55.50 23 117
165.00 SRSXM.X 51.76 Up 3.56 58.10 59.90 38 282
170.00 SRSXN.X 56.11 Up 6.11 62.30 64.40 42 83
175.00 SRSXO.X 43.50 0.00 68.00 69.80 16 97
180.00 SRSXP.X 62.20 Up 1.00 71.60 73.00 4 165
185.00 SKRXQ.X 67.20 Down 0.90 76.00 77.50 21 86
190.00 SKRXR.X 75.70 Up 25.90 80.90 82.30 10 163
195.00 SKRXS.X 53.10 0.00 85.50 86.90 10 152
200.00 SKRXT.X 90.90 Up 15.90 89.90 91.50 13 292
210.00 SKRXB.X 88.30 Up 15.10 99.60 101.20 1 116
220.00 SKRXD.X 99.40 Down 3.70 108.30 110.60 10 137
230.00 SKRXF.X 106.70 0.00 117.70 120.20 10 54
240.00 SKRXH.X 116.50 0.00 128.80 130.70 22 155
250.00 SKRXJ.X 117.00 0.00 138.00 140.30 5 110
260.00 SKRXL.X 128.00 0.00 146.60 148.50 10 59
270.00 SKRXN.X 84.90 0.00 156.60 158.80 47 58
280.00 SKRXP.X 157.40 Up 85.88 167.50 169.70 1 73
290.00 SKRXU.X 161.00 0.00 175.60 177.80 0 2
300.00 SKRXV.X 108.50 0.00 185.30 187.50 1 27
310.00 SKRXW.X 96.00 0.00 195.00 197.80 2 1
320.00 SKRXX.X 152.50 0.00 204.80 207.70 0 1
330.00 SKRXY.X 161.80 0.00 214.90 217.50 0 12
340.00 SKRXZ.X 199.70 0.00 224.60 227.40 0 10
360.00 SKRXC.X 136.00 0.00 245.20 248.20 1 21
370.00 SKRXE.X 143.70 0.00 255.20 257.90 1 31
380.00 SKRXG.X 171.40 0.00 264.90 267.70 12 42
390.00 SKRXI.X 180.00 0.00 273.60 276.10 14 33
410.00 SKRXM.X 231.00 0.00 293.80 296.50 0 12
420.00 SKRXO.X 248.90 0.00 305.00 307.80 22 22
   

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