Think a stock like UVXY, UVIX or BOIL is going down? Most people know about shorting, but there’s actually a better way.
First, let’s get clear on the basics:
Shorting stock = Borrowing someone’s shares, selling them now, hoping to buy them back cheaper later
Selling calls = Getting paid to make a promise: “I’ll sell you this stock at a specific price if you want it”
Think of it like this: Shorting is like borrowing your neighbor’s lawnmower, selling it for $500, and hoping you can buy the same mower for $300 later to give back to them. Selling calls is like getting paid $50 to promise someone they can buy your lawnmower for $600 next month (when you think it’ll only be worth $400).
You Get Paid Right Away (And Maybe Keep It All)
Here’s the beautiful part about selling calls: someone pays you cash immediately. That money is yours to keep no matter what happens (as long as the stock doesn’t go above a certain price).
Let’s say XYZ stock is at $100 and you think it’s overvalued. Instead of shorting it, you sell someone the right to buy it from you at $110 for the next month. They pay you $200 for this right.
Now watch what happens:
Stock drops to $90? You keep the $200. They won’t buy at $110 when it’s worth $90.
Stock stays at $100? You keep the $200. Still no reason to buy at $110.
Stock goes to $105? You still keep the $200. They still won’t exercise.
Stock goes to $108? You keep the $200. You’re still winning.
With shorting, you only make money if the stock goes DOWN. With selling calls, you make money if it goes down, sideways, or even up a little bit. That’s three ways to win instead of one.
No More Borrowing Nightmares (The UVXY Example)
When you short a stock, borrowing fees can destroy you. Take UVXY, the borrowing cost can hit 50-100% per year. That means you’re paying $50 to $100 annually just to short $100 worth of stock!
Imagine paying $5,000 a year just for the privilege of shorting $10,000 of UVXY. You need massive drops just to break even. It’s insane.
With selling calls on UVXY? No borrowing fees. Zero. You actually collect huge premiums because UVXY is so volatile.
Time Is Your Best Friend (Not Your Enemy)
Options decay like ice cream melting on a hot day. Every day that passes, the call option you sold becomes worth less. This is especially powerful with something like UVXY, which naturally decays over time due to how it’s structured.
When you short UVXY:
You pay borrowing costs daily (expensive!)
You wait for decay while bleeding money
You need big moves to overcome your costs
When you sell UVXY calls:
You collect premium immediately
Time decay works for you
The natural UVXY decay PLUS option decay = double win
Real Numbers to Show the Difference
Let’s use two examples - Tesla at $200 and UVXY at $20:
Tesla - Shorting vs. Selling Calls:
Short 100 shares: Need $10,000+ margin, pay modest borrowing costs
Sell $220 call: Collect $500 immediately, profit if it stays below $225
UVXY - Shorting vs. Selling Calls:
Short 100 shares: Need margin, pay 50%+ yearly ($1,000+ on a $2,000 position!)
Sell $25 call: Collect $150 immediately, profit if it stays below $26.50
See how dramatic the difference becomes with hard-to-borrow stocks like UVXY?
You Can Control Your Risk Better
Let’s be honest: sometimes you’ll be wrong. The stock you’re bearish on will go up. But here’s where selling calls can protect you.
Say you shorted 100 shares at $100. The stock rockets to $150. You just lost $5,000. That hurts.
But if you sold a call spread (selling one call at $110 and buying another at $120), your maximum loss is only $1,000 no matter how high the stock goes. It could go to $1,000 a share and you still only lose $1,000.
You can literally choose how much you’re willing to lose before you even make the trade.
Pick Your Odds Like the House
This is the part that will really make sense once you see it. When you sell calls, you can basically choose your probability of winning.
Want to win 90% of the time? Sell calls way above the current price. You’ll make less money per trade, but you’ll win almost every time.
Want bigger payouts? Sell calls closer to the current price. You’ll win less often but make more when you do.
It’s like being the casino instead of the gambler. You can set up trades where the odds are heavily in your favor. The trade-off is smaller profits, but consistent wins can add up quickly.
Real Numbers to Make It Clear
You think TESLA is overpriced at $200. Here are your choices:
Option 1: Short 100 shares
You need $10,000+ in margin
You pay maybe $20/day in borrow costs
If it goes to $250, you lose $5,000
If it stays at $200 for a month, you lose $600 in fees
You only make money if it drops
Option 2: Sell a $220 call for next month
You collect $500 immediately
No daily fees
If it stays under $220, you keep the $500
You win if it drops, stays flat, or goes up less than 10%
Maximum profit: $500 (the premium)
See the difference? One way you’re paying daily hoping for a crash. The other way you’re getting paid to be right about it NOT going to the moon.
When Shorting Still Makes Sense
I’m not saying never short stock. Sometimes it’s the right move:
If you think a stock is facing immediate collapse
If you want to hold the position for many months or years without managing it
If the options market for that stock is illiquid or has wide bid-ask spreads
If you need a simple hedge for a long portfolio
But for most bearish bets, selling calls offers more flexibility and better odds.
The Important Risks to Understand
If you sell “naked” calls (meaning you don’t own the stock), you can theoretically lose unlimited money. If you sell someone the right to buy at $110 and the stock goes to $500, you’re facing serious losses.
However, you can manage this risk by:
Using spreads to cap your maximum loss
Sizing positions appropriately
Having clear exit strategies
Never trade with money you can’t afford to lose, and always understand your maximum risk before entering a position.
Why This Strategy Isn’t More Popular
Brokers make more money when you short stock. They collect those borrowing fees. They make money on the bigger margin requirements. They benefit when traders panic-cover their shorts.
Selling calls? They make one small commission and that’s it. Plus, options require more education and approval levels, which means fewer clients trading them.
Getting Started Safely
Start with education - Learn the basics of options before risking real money
Paper trade first - Practice with simulated money
Master covered calls - Sell calls on stocks you already own
Learn spreads - Cap your risk by buying a further call
Size appropriately - Start small and increase as you gain experience
Have an exit plan - Know when you’ll cut losses BEFORE you trade
The Bottom Line
When you’re bearish on a stock, you want to profit from it going down. But selling calls lets you profit from it going down, sideways, or even up a little. You get paid immediately, don’t pay borrowing fees, and can choose your odds of winning.
It’s like the difference between betting your friend $100 that a football team will lose (shorting) versus getting paid $20 to promise you’ll sell him your ticket for $150 if the team makes the Super Bowl when you think they won’t even make the playoffs (selling calls).
One requires them to lose. The other just requires them not to win big.
Which bet would you rather make?