Traders can also hedge against further dips in small-caps with inverse and leveraged ETF options. For instance, the ProShares Short Russell 2000 ETF (NYSEArca: RWM), which reflects the -1x or -100% daily performance of the Russell 2000 Index, have returned 1.1% over the past week. [ETFs to Hedge Against Potential Market Weakness]
Additionally, for the more aggressive trader, the ProShares UltraShort Russell 2000 ETF (NYSEArca: TWM), which tracks the -2x or -200% daily performance of the Russell 2000, increased 2.3% over the past week. The Direxion Daily Small Cap Bear 3X Shares (NYSEArca: TZA), which tracks the -3x or -300% daily performance of the Russell 2000, was 12.1% higher over the past week while the ProShares UltraPro Short Russell 2000 ETF (NYSEArca: SRTY), which also takes the -300% performance of the Russell 2000, was up 3.4%.
Potential investors should know that inverse and leveraged ETFs may not perfectly reflect their target strategies over a long period of time due to daily rebalances and the compounding effect.
Russell 2000 Index
For more information on small-capitalization stocks, visit our small-cap category.
Max Chen contributed to this article. Tom Lydon’s clients own shares of IWM.