How To Short The S&P 500 With ETFs

The fast-spreading coronavirus has taken away the stock market’s shine, pushing the major U.S. indices into correction territory (a fall of 10% or more from the recent peak). The S&P 500 saw the fastest correction since the Great Depression with six consecutive days of decline after it hit new record highs last week. The index is down 12% from its record high hit on Feb 19. In fact, the index marked the worst daily percentage decline since Aug 18, 2011.

The number of virus cases across the globe has been rising rapidly. The contagion has resulted in more than 2,800 deaths and has infected about 83,000 worldwide including more than 650 in Italy, 60 in the United States, 25 in Spain, and 16 in the United Kingdom. The World Health Organization warned that the coronavirus outbreak had “pandemic potential,” with cases continuing to climb across the world.

With the escalation in virus scare, the global economy is on course for its weakest year since the 2008 financial crisis as efforts to contain epidemic has hit manufacturing activity in China and disrupted international trade and travel, according to Bank of America. Per the International Monetary Fund, the outbreak could reduce global economic growth by 0.1% this year. Goldman now projects the U.S. economy to grow just 1.2% in the first quarter, down from 2.1% in the fourth quarter and 2.3% in full-year 2019.

Given the bearish trends, investors could easily tap this opportune moment by going short on the index. There are a number of inverse or leveraged inverse products in the market that offer inverse (opposite) exposure to the index. Below, we highlight those and some of the key differences between each:

ProShares Short S&P500 ETF (SH - Free Report)

This fund provides unleveraged inverse exposure to the daily performance of the S&P 500 index. It is the most popular and liquid ETF in the inverse equity space with AUM of $2.1 billion and average daily volume of 5.3 million shares. The fund charges 89 basis points (bps) in annual fees and has added 12.8% in a week.

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Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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