Getting tactical allocation with inverse exchange-traded funds (ETFs) doesn’t mean traders need to take on double or even triple the leverage. Direxion Investments has a pair of funds with single inverse leverage in the S&P 500 and China A-Shares.
A confluence of factors are adding heavy volatility into the major stock market indexes like the S&P 500. For the bullish-only trader, it’s a matter of patience and potentially dollar-cost averaging into the weakness before things turn around.
Akin to a chess game, a bullish-only trader is like a pawn before it reaches the end of the chessboard. You’re only relegated to moving your piece forward and are essentially exposed to other pieces on the chessboard.
With rising inflation, rate hikes by the Federal Reserve, the pandemic, and even geopolitical factors, being bullish only can have its disadvantages. This is where having the ability to profit from a downward trending market.
As mentioned, traders don’t have to take on a lot of leverage. They can get single inverse exposure to the S&P 500 with the Direxion Daily S&P 500 Bear 1X ETF (SPDN), which seeks daily investment results equal to 100% of the inverse of the daily performance of the S&P 500® Index.
Trading China’s Version of the S&P 500
China had its fair share of nuances with its equities market volatility. In addition to the pandemic, the Evergrande Crisis also put downward pressure on their stock market as real estate developers were facing credit defaults.
As such, traders can take an inverse approach to China’s top equities with the Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD). Like SPDN, it doesn’t have the extra dose of leverage for traders who don’t want the amplified exposure.
CHAD seeks daily investment results, before fees and expenses, of 100% of the inverse of the daily performance of the CSI 300 Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse (opposite) or short exposure to the index equal to at least 80% of the fund’s net assets (plus borrowing for investment purposes).
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