FANG stocks, or the Facebook (NasdaqGS: FB), Amazon (NasdaqGS: AMZN), Netflix (NasdaqGS: NFLX) and Google parent Alphabet (NasdaqGS: GOOG), are in for a big week of earnings, but exchange traded funds investors who are wary of a potential miss in their quarterly results could look to inverse or bearish strategies to hedge against downside risks.
Facebook will report its quarterly earnings on Wednesday while Amazon and Alphabet are next up on Thursday.
Big technology companies have made up a large chunk of the S&P 500’s total return this year, and some observers are now concerned that this area of the market is most vulnerable in case of a pullback. The S&P 500’s information technology sector surged over 30% this year while the communications services segment advanced closed to 20%.
Luckily, ETF investors can turn to targeted strategies to hedge against any potential downside risks in case these companies report an earnings miss and trigger a pullback.
For example, RexShares has come out with the MicroSectors FANG+ Index -2X Inverse Leveraged ETNs (NYSEArca: FNGZ) and MicroSectors FANG+ Index Inverse ETNs (NYSEArca: GNAF) to capitalize on the misery among FANG stocks
The inverse ETNs are based off the NYSE FANG+ Index, which was created to provide exposure to a select group of widely-held technology stocks. The stocks included in the FANG+ index are highly liquid and growth-oriented, including tech-enabled companies from the tech and consumer discretionary sectors. Specifically, the index includes exposure to the five core “FANG” stocks — Facebook, Apple, Amazon, Netflix and Alphabet’s Google, plus another five actively-traded technology growth stocks — Alibaba, Baidu, NVIDIA, Tesla and Twitter.
Furthermore, as the FANG group include prominent internet names taken out of the broader communications sector, ETF investors can also look to bearish communication services sector plays, such as the ProShares UltraShort Communication Services Select Sector ETF (YCOM), ProShares UltraPro Short Communication Services Slect Sector ETF (SCOM) and Direxion Daily Communication Services Index Bear 3X Shares (NYSERCA: MUTE).
The ETFs will try to reflect the -2x and -3x daily performance of the S&P Communication Services Select Sector Index. YCOM tries to achieve -2x or -200% short exposure, SCOM tries to achieve -3x or -300% short exposure and MUTE takes the -3x or -300% exposure as well.
For more information on alternative strategies, visit our alternatives category.