Direxion Investments, known for its leveraged exchange traded funds, has come out with a simple short or bearish play on the S&P 500.
The Direxion Daily S&P 500 Bear 1x Shares ETF (NYSEArca: SPDN) will try to reflect the daily performance of 100% of the inverse performance of the S&P 500 index.
“With the S&P 500 near all-time highs and trepidation about the future of the global economy, wealth managers are thinking about how to position portfolios for market pullbacks and increased volatility,” Sylvia Jablonski, Managing Director at Direxion, said in a press release. “SPDN allows tactical managers to capitalize on changing markets by taking an inverse view, or seeking downside protection in a simple, flexible and low-cost way.”
Traders may utilize inverse stock ETFs like SPDN to hedge against market pullbacks as the S&P 500 tests its all-time highs, again. Technical traders are growing more cautious after the S&P 500 recently formed a triple top – a bearish pattern that identifies three peaks at nearly the same level and may predict a reversal in a prolonged uptrend.
“With the S&P 500 close to all-time highs, stretched valuations and a lack of growth, drawdown risk appears elevated,” strategist Christian Mueller-Glissmann wrote in a note to clients Tuesday.[related_stories]
SPDN will be up against the well-established ProShares Short S&P 500 (NYSEArca: SH), the largest inverse-related U.S.-listed ETF on the market with $3 billion in assets under management.
SPDN, though, comes with a cheaper 0.45% net expense ratio, compared to SH’s 0.90% expense ratio.
Potential traders should be aware of the risks associated with these inverse fund options. The inverse ETF tries to provide a bearish view on the S&P 500 on a daily basis. Consequently, when investors look at the long-term performance of these types of ETFs, people may notice that the funds may not perfectly reflect their intended strategies due to compounding effects. Inverse ETF traders should closely monitor their holdings.
For more information on new fund products, visit our new ETFs category.