We recently observed buyers of calls in ProShares UltraShort S&P 500 (NYSEArca: SDS). Call buyers in this inverse (leveraged) product is equivalent to getting short the S&P 500.
This allows us to bring emphasis to other short (inverse) and leveraged products in the large-cap space. ProShares also offers ProShares UIltraPro Short S&P 500 (NYSEArca: SPXU) which offers 3 times daily leveraged inverse exposure to the S&P 500 instead of 2 times.
For those portfolio managers who are benched to the Russell 1000 Index as opposed to the S&P 500, there exists Direxion Daily Large Cap Bear 3X (NYSEArca: BGZ), which is similar in construction to SDS with a daily leveraging effect, but the index it tracks is the Russell 1000 as opposed to the S&P 500.
BGZ and SPXU offer 3 times daily leveraged inverse exposure to the benchmark instead of 2 times, so for high-conviction short term directional plays, BGZ and SPXU are the higher octane funds.
For those not interested in leverage, ProShares Short S&P 500 (NYSEArca: SH) is a potential option.
We will continue to closely monitor flows not only in large-cap ETF/index options, but also the inverse/leveraged products in terms of asset inflows/outflows from a creation/redemption standpoint, as this will likely provide clues to institutional sentiment regarding the short and longer term direction of the equity markets.
ProShares UltraShort S&P 500
Chart source: StockCharts.com.
Editor’s note: For more information on Street One ETF research, contact [email protected].