Short exchange traded funds (ETFs) are meant to head up as the market heads south – something it seems to have been doing a lot of lately.

The ProShares UltraShort S&P 500 (SDS) and Rydex Inverse 2x S&P 500 ETF are (RSW) no exception, especially as they are designed to deliver twice the opposite performance of its underlying index. The S&P has had some upswings in the last several months, but overall, it’s on a downward trend:

  • In the last month, it’s lost 1.7%
  • Over three months, it’s down 7.5%
  • Year-to-date, it has lost 8.1%

Mike Paulenoff at MPTrader predicts that the SDS should climb some more, and he’s using it to hedge a few long positions.


Although they are good options for investors looking to continue making gains while the market is on a downward trend, it’s always wise to be aware of the risks involved when it comes to short ETFs. The potential to win big is there, but you could crash and burn, too, if caution isn’t exercised. Always make sure they are right for your portfolio.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.