5 Top Inverse and Short ETFs for Traders
The longest bull market in history came to a screeching halt this year.
The Nasdaq officially closed in bear market territory March 7 with the Dow and the S&P 500 still falling deeper into correction.
Throughout this tumultuous start to the year, some of the Top 5 ETFs for Day Traders have been hit hard.
But shorting individual stocks isn’t the only way to make money in a falling market.
Inverse and short ETFs may be your better option.
These funds are pinned to a specific index, just like QQQ tracks the Nasdaq and SPY tracks the S&P 500.
But instead of tracking closely with the movement of that index, inverse and short ETFs move in the opposite direction.
Most are also leveraged, meaning they deliver returns 2x or 3x what the index’s movement.
Here are 5 top inverse and short ETFs for day traders:
ProShares UltraPro Short QQQ (SQQQ)
The ProShares UltraPro Short QQQ (SQQQ) is the short version of the Invesco QQQ Trust Series I (QQQ).
Just like QQQ, this ETF tracks the performance of the Nasdaq 100.
But instead of moving with the index, SQQQ moves in the opposite direction.
The fund is also three times leveraged.
If the Nasdaq 100 falls 2% in a session, SQQQ is meant to rise about 6%.
But that leveraging is specifically weighted for a single session.
ProShares warns traders “Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return, and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period.”
The fund has an expense ratio of 0.95, average daily trading volume of more than 68 million shares and over $2.6 billion in net assets, at writing.
ProShares UltraPro Short S&P 500 (SPXU)
The ProShares UltraPro Short S&P 500 (SPXU) is a short ETF for the S&P 500.
This fund aims to track the inverse movement of the benchmark index.
SPXU is three times leveraged and comes with the same warning from ProShares as SQQQ.
The company says this ETF “seeks a return that is -3x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.”
The fund has an expense ratio of 0.9%, average daily trading volume of more than 27 million shares, and over $545 million in net assets, at writing.
ProShares UltraShort 20+ Year Treasury (TBT)
Proshares UltraShort 20+ Year Treasury (TBT) is the short version of TLT, which we covered in this post.
The fund moves in the opposite direction of an index of U.S. Treasury bonds with remaining maturities of 20 years or more.
TBT is two times leveraged, meaning it seeks a return that is double the inverse of the underlying benchmark.
Just like all of the short/inverse ETFs we’ve covered so far, that leveraged return is intended for a single session.
TBT has an expense ratio of 0.9%, average daily trading volume of more than 9 million shares, and nearly $1.2 billion in net assets, at writing.
Direxion Daily Small Cap Bear 3x Shares (TZA)
Although I included the Direxion Daily Small Cap Bear 3x Shares (TZA) in my Top 5 ETFs for Day Traders, it’s worth a repeat here.
This fund tracks the Russell 2000 and is three times leveraged.
The fund has an expense ratio of 0.94%, average daily trading volume of more than 21 million shares, and more than $359 million in net assets, at writing.
Direxion Daily Semiconductor Bear 3X Shares (SOXS)
Direxion Daily Semiconductor Bear 3X Shares (SOXS) is an industry specific inverse ETF.
This fund tracks the ICE Semiconductor Index.
The chipmaking industry has been hit hard by supply chain disruptions and major shortages as the economy reopens after Covid.
And those issues have knocked down related stocks, benefiting traders of SOXS.
The fund is three times leveraged and as with any leveraged fund, that return is intended for a single session.
Direxion tells traders this ETF “should not be expected to provide negative three times the return of the benchmark’s cumulative return for periods greater than a day.”
SOXS has an expense ratio of 0.95%, average daily trading volume of more than 51 million shares, and over $175 million in net assets, at writing.
If you want more ideas of ETFs to trade, be sure to check out this post to learn more about the 4 Top Fintech ETFs to Watch!