Inverse ETFs to Capitalize on Market Turns

March 25th at 11:33am by Tom Lydon

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.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.