One of the first things President Donald Trump did while in office was sign an executive order on Obamacare. Investors worried about their healthcare exposure have a few exchange traded fund options to hedge against further risk if Obamacare is rolled back.
The Health Care Select Sector SPDR (NYSEArca: XLV) fell 0.5% Monday, testing its short-term resistance at the 50-day simple moving average.
Healthcare stocks weakened in response to Trump’s executive order on Obamacare that reaffirmed his commitment to dismantling the health reform law. The order directed the Health and Human Services secretary and the heads of other agencies to minimize the financial burden of the Affordable Care Act on Americans, states, insurers, healthcare providers and others, reports Tami Luhby for CNN Money.
While plenty of laws are in place to support Obamacare, the Trump administration can fiddle with the guidance that enables agencies to implement the ACA or loosen rules and soften the teeth used to enforce the healthcare law.
“It’s a mix of symbolic arm waving (lacking more specific and targeted details) and directional guidance to empower Trump administration officials to lean against more regulation on the margin,” Tom Miller, resident fellow at the American Enterprise Institute, told CNN Money. “What remains unclear is how far they can go before they bump up against clearer statutory requirements and existing final regulations.”
Investors who are wary of the potential changes and the effects it will have on the healthcare sector can take steps to hedge against further risks through inverse ETF options. For example, the ProShares UltraShort Health Care (NYSEArca: RXD) follows the -2x or -200% daily performance of the broader healthcare sector and the Direxion Daily Healthcare Bear 3x Shares (NYSEArca: SICK) takes the -3x or -300% daily performance of healthcare stocks. Additionally, the Direxion Daily Pharmaceutical & Medical Bear 2X Shares (NYSE: PILS) may act as a hedge on medical and pharmaceutical stocks .
For more information on the healthcare sector, visit our healthcare category.