The latest volatility due to the U.S.-China trade wars are showing that it’s profitable to be a bear using inverse exchange-traded funds (ETFs). Gains can be had for inverse ETFs of the leveraged variety, and one doesn’t need a large trading account to take advantage of the bear market.
China responded to the latest tariff threats by U.S. President Donald Trump by promising to take “necessary countermeasures” if the Trump administration follows through on its threat to increase tariffs on Chinese goods.
In turn, China’s Commerce Ministry said that it would make retaliatory moves if U.S. tariffs on $200 billion of Chinese goods are increased to 25% from 10% as promised by the Trump administration. It did just that on Monday:
- Category 1 (includes cotton, machinery, grains) went from 10% to 25%
- Category 2 (includes aircraft parts, optical instruments, certain types of furniture) went from 10% to 20%
- Category 3 (includes corn flour, wine) went from 5% to 10%
- Category 4 (includes certain types of chemical, rare earths, medical equipment like ultrasound and MRI machines) stayed the same at 5%
With the latest sell-offs in U.S. equities, here are some top plays for traders with low capital:
ProShares Short Russell2000 (NYSEArca: RWM): seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the Russell 2000® Index. The fund invests in financial instruments that ProShare Advisors believes, in combination, should produce daily returns consistent with the fund’s investment objective. It is a float-adjusted, market capitalization-weighted index containing approximately 2000 of the smallest companies in the Russell 3000® Index or approximately 8% of the total market capitalization of the Russell 3000® Index, which in turn represents approximately 98% of the investable U.S. equity market.
ProShares Short S&P 500 (NYSEArca: SH): tracks the large-cap U.S. stock market performance. SH is a float-adjusted, market capitalization-weighted index of 500 U.S. operating companies and real estate investment trusts selected through a process that factors in criteria such as liquidity, price, market capitalization and financial viability.
ProShares UltraPro Short QQQ ETF (NasdaqGM: SQQQ): seeks daily investment results, before fees and expenses, that correspond to three times the inverse (-3x) of the daily performance of the NASDAQ-100 Index®. The fund invests in financial instruments that ProShare Advisors believes, in combination, should produce daily returns consistent with the fund’s investment objective. The index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.
Direxion Daily Technology Bear 3X ETF (NYSEArca: TECS)–up 10.9 percent: seeks daily investment results of 300 percent of the inverse of the daily performance of the Technology Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector. It is non-diversified.
ProShares UltraShort Semiconductors (SSG): seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the Dow Jones U.S. SemiconductorsSM Index. The fund invests in financial instruments that ProShare Advisors believes, in combination, should produce daily returns consistent with the fund’s investment objective. The index seeks to measure the performance of certain companies in the semiconductor sub-sector of the U.S. equity market.
AdvisorShares Ranger Equity Bear ETF (NYSEArca: HDGE): seeks capital appreciation through short sales of domestically traded equity securities. The Sub-Advisor seeks to achieve the fund’s investment objective by short selling a portfolio of liquid mid- and large-cap U.S. exchange-traded equity securities, ETFs, ETNs and other exchange-traded products. The fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in short positions in equity securities. The Sub-Advisor implements a bottom-up, fundamental, research driven security selection process.
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