Inverse ETFs to Capitalize on Market Turns

While it is painful to watch investment picks turn sour, more aggressive exchange traded fund traders are capitalizing on a market’s misfortunes with inverse fund products.

Inverse ETFs, or short funds, try to generate the daily inverse, or opposite, performance of a given benchmark index. Basically, inverse ETFs go up as benchmarks go down, and vice versa, writes Jeff Reeves for InvestorPlace. [Traders Hedging with Short S&P 500 ETF]

Traders should know that inverse products are not suitable for long-term buy-and-hold investors as the compounding affects from the daily rebalances would create divergences from the ETF’s performance to that of the underlying index, especially over periods of high volatility. [Inverse & Leveraged ETFs]

Many active traders, though, are utilizing inverse products as a hedge or short-term tactical play, with simple inverse, or -1x, plays and even others with -2x or even -3x options. Potential investors should be aware that while these investments may be rewarding, they also come with high risks. [Bears Speculate on Reversal with Short S&P 500 ETF]

Reeves highlights a number inverse ETFs that provide exposure to major market indices, including -100%, -200% and -300% fund options.

1x Short Funds:

  • Direxion Daily Total Market Bear 1x Shares (NYSEArca: TOTS): -100% of the MSCI US Broad Market Index.
  • ProShares Short Dow30 ETF (NYSEArca: DOG): -100% of the Dow Jones Industrial Average.
  • ProShares Short MidCap 400 ETF (NYSEArca: MYY): -100% of the S&P MidCap 400 Index.
  • ProShares Short QQQ ETF (NYSEArca: PSQ): -100% of the Nasdaq 100 Index.
  • ProShares Short Russell 2000 ETF (NYSEArca: RWM): -100% of the Russell 2000 small-cap stock index.
  • ProShares Short S&P 500 ETF (NYSEArca: SH): -100% of the S&P 500.
  • ProShares Short Small Cap 600 (NYSEArca: SBB): -100% of the S&P Small Cap 600.

2x Short Funds:

  • ProShares UltraShort Dow 30 ETF (NYSEArca: DXD): -200% of the Dow Jones.
  • ProShares UltraShort Mid Cap 400 ETF (NYSEArca: MZZ): -200% of the S&P Mid Cap 400.
  • ProShares UltraShort QQQ ETF (NYSEArca: QID): -200% of the Nasdaq 100.
  • ProShares UltraShort Russell Mid Cap Value ETF (NYSEArca: SJL): -200% of the Russell Mid Cap Value Index.
  • ProShares UltraShort Russell Mid Cap Growth ETF (NYSEArca: SDK): -200% of the Russell Mid Cap Growth Index.
  • ProShares UltraShort Russell1000 Value ETF (NYSEArca: SJF): -200% of the Russell 1000 Value Index.
  • ProShares UltraShort Russell1000 Growth ETF (NYSEArca: SFK): -200% of the Russell 1000 Growth Index.
  • ProShares UltraShort Russell 2000 ETF (NYSEArca: TWM): -200% of the Russell 2000 Index.
  • ProShares UltraShort Russell 2000 Growth ETF (NYSEArca: SKK): -200% of the Russell 2000 Growth Index.
  • ProShares UltraShort Russell 2000 Value ETF (NYSEArca: SJH): -200% of the        Russell 2000 Value Index.
  • ProShares UltraShort Russell 3000 ETF (NYSEArca: TWQ): -200% of the Russell 3000 Index.
  • ProShares UltraShort S&P 500 ETF (NYSEArca: SDS): -200% of the S&P 500.
  • ProShares UltraShort Small Cap 600 ETF (NYSEArca: SDD): -200% of the S&P Small Cap 600.

3x Short Funds

  • Direxion Daily S&P 500 Bear 3x Shares (NYSEArca: SPXS): -300% of the S&P 500 Index.
  • Direxion Daily Mid Cap Bear 3x Shares (NYSEArca: MIDZ): -300% of the S&P Mid-Cap 400 Index.
  • Direxion Daily Small Cap Bear 3x Shares (NYSEArca: TZA): -300% of the Russell 2000.
  • ProShares UltraPro Short QQQ ETF (NasdaqGM: SQQQ): -300% of the Nasdaq 100.
  • ProShares UltraPro Short Dow 30 ETF (NYSEArca: SDOW): -300% of the DJIA.
  • ProShares UltraPro Short S&P 500 ETF (NYSEArca: SPXU): -300% of the S&P 500.
  • ProShares UltraPro Short Mid Cap 400 ETF (NYSEArca: SMDD): -300% of the S&P Mid Cap 400.
  • ProShares UltraPro Short Russell 2000 ETF (NYSEArca: SRTY): -300% of the Russell 2000.

For more information on inverse products, visit our inverse ETFs category.

Max Chen contributed to this article.

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