As markets enjoy a breakout to new highs, the question now is whether they will build further momentum or swoon. Exchange traded fund investors are intent on determining how to be positioned for further upside while protecting against a pullback.
On the upcoming webcast, Scaling the Wall of Worry: The Power of Flexibility in Volatile Markets, Sylvia Jablonski, Managing Director and Institutional ETF Strategist at Direxion, and Taylor Lukof, Founder and CEO of ABR Dynamic Funds, will discuss various alternative strategies to help investors and advisors achieve successful dynamic management of investment assets.
For instance, investors can turn to leveraged and inverse ETFs to hedge market risks or capitalize on sudden swings.
Investors have utilized leveraged and inverse ETFs in a number of portfolio strategies. A small percentage allocations in inverse leveraged options can help hedge or mitigate detraction from existing positions, so investors are simultaneously going long and short to hedge risk. Through leveraged and inverse ETFs, investors may limit portfolio volatility or diminish drawdowns in the event of a steep market correction.
For example, the energy sector has also been gyrating after the plunge in oil prices and recent rebound in crude, especially the oil exploration and production sub-sector, which has been hardest hit during the energy sell-off. Consequently, traders have played the sudden turns in the sub-sector through the relatively new Direxion Daily S&P Oil & Gas Exploration & Production Bear 3x Shares (NYSEArca: DRIP), which takes the -3x or -300% daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index, and Direxion Daily S&P Oil & Gas Exploration & Production Bull 3x Shares (NYSEArca: GUSH), the bullish alternative to DRIP.
Similarly, the natural gas market has exhibited heightened volatility as consumers react to changing temperatures. The Direxion Daily Natural Gas Related Bear 3X Shares (NSYEArca: GASX) has previously been a popular bet to capitalize on the misfortunes in the natgas market, but the long Direxion Daily Natural Gas Related Bull 3X (NYSEArca: GASL) has quickly gained traction as investors try to ride a rally.
Looking ahead, the Direxion Daily 20-Year Treasury Bear 3X (NYSEArca: TMV), which takes the inverse -3x or -300% daily performance of the NYSE 20 Year Plus Treasury Bond Index, could also be a great way to play a rising interest rate environment as the Federal Reserve contemplates higher rates.
Financial advisors who are interested in learning more about alternative investment strategies can register for the Thursday, April 6 webcast here.