Technology stocks have been among the best performers in bull market rally, but have recently experienced wild swings that have shaken many investors. If volatile in this market segment continues, traders may look to bearish or inverse technology exchange traded funds to hedge further risks.
The Nasdaq-100 Index’s gauge of one-month implied volatility is exceeding the S&P 500’s by the most in over 13 years, signaling heightened fear among tech giants, Bloomberg reports.
Michael Purves, chief global strategist at Weeden & Co, warned that there is increasingly unwillingness to pay a high price for potential earnings growth of the high-flying tech giants that could face potentially massive regulatory scrutiny.
Related: Two Tech Trends Shaping 2018
That tumult “underscores our view that the regime shift to be concerned with right now is much more about the potential unraveling of a high price-to-earnings/low-market-beta FANG condition than it is about a rate scare or ugly tariff news flow,” Purves wrote in a note to clients.
“Rising volatility and changing market leadership are now pointing towards the possible conclusion that the stock market peaked in late January 2018,” Douglas Kass, president of Seabreeze Capital Management, told Reuters.
Top Inverse Technology ETFs
However, investors can hedge against against further dips in the Nasdaq through bearish options. For instance, the ProShares Short QQQ ETF (NYSEArca: PSQ) takes the inverse or -100% daily performance of the Nasdaq-100 Index. For the aggressive trader, the ProShares UltraShort QQQ ETF (NYSEArca: QID) tracks the double inverse or -200% performance of the Nasdaq-100, and the ProShares UltraPro Short QQQ ETF (NasdaqGM: SQQQ) reflects the triple inverse or -300% of the Nasdaq-100.
For a more technology sector focus, the ProShares UltraShort Technology (NYSEArca: REW) takes the -2x or -200% daily performance of the Dow Jones U.S. Technology index and the Direxion Daily Technology Bear 3X Shares (NYSEArca: TECS) reflects the -3x or -300% daily performance of the S&P Technology Select Sector Index.
Additionally, for targeted exposure to semiconductor names that have experienced greater swings, the ProShares UltraShort Semiconductors (NYSEArca: SSG) takes the -2x or -200% daily performance of the Dow Jones U.S. Semiconductors Index and the Direxion Daily Semiconductors Bear 3x Shares (NYSEArca: SOXS) provides a -3x or -300% performance of the PHLX Semiconductor Select Index.
For more information on the tech segment, visit our technology category.