Short exchange traded funds (ETFs) are especially of interest right now, given the market conditions and circumstance.

Short ETFs give investors the opportunity to profit in down markets, and they also allow maximization of returns in up markets. Taking a short position is simply the sale of a security or ETF in hopes that the asset will fall in value. This has been occurring all over the stock market lately.

Investopedia’s example is an investor who borrows shares of stock from a broker, and sells them on the open market. Eventually, the investor must return the borrowed stock by buying it back from the open market, and is the stock, or ETF,  falls in price, a  profit is made.

It sounds simple, but there are many risks that are attached to these types of sales. Risks include high volatility, the potential for bigger losses, so make sure that you know what is involved. Short selling is a tool for speculation and a way to take advantage of high volatility in a stock market.

Some of Monday’s winners for the short ETFs:

  • ProShares Short MSCI EAFE (EFZ): up 10.27% one day
  • ProShares Short S&P 500 (SH): up 8.28% one day
  • ProShares Short QQQ (PSQ): up 8.43% in one day

Long, Short Exchange Traded Funds (ETFs)

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.