How To Short The S&P 500 With ETFs

Direxion Daily S&P 500 Bear 1X Shares (SPDN - Free Report)

This ETF also offers unleveraged inverse exposure to the daily performance of the S&P 500 index. It has accumulated $18.9 million in its asset base while trades in average daily volume of 34,000 shares. The fund is cheap relative to other inverse products as it charges just 45 bps in annual fees. It has gained 12.9% in the same time frame.

ProShares UltraShort S&P500 ETF (SDS - Free Report)

This fund seeks two times (2x) leveraged inverse exposure to the index, charging 89 bps in fees. It is also relatively popular and liquid having amassed nearly $1.3 billion in AUM and more than 7 million shares in average daily volume. It has climbed 26.9% in a week.

ProShares UltraPro Short S&P500 (SPXU - Free Report)

Investors having a more bearish view and higher risk appetite could find SPXU interesting as the fund provides three times (3x) inverse exposure to the index. The ETF charges a fee of 91 bps per year and trading volume is solid, exchanging around 7.2 million shares per day on average. It has amassed $660.6 million in its asset base and is up 42% in the same time frame.

Direxion Daily S&P 500 Bear 3x Shares (SPXS - Free Report)

Like SPXU, this product also provides three times inverse exposure to the index but comes with 4 bps higher fees. It trades in solid volume of about 9 million shares and has AUM of $546.7 million. SPXS surged 42% in a week.

Bottom Line

While the strategy is highly beneficial for short-term traders, it could lead to huge losses compared with traditional funds in fluctuating or seesawing markets. Further, their performances could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as weeks or months) due to their compounding effect.

Still, for ETF investors who are bearish on equities for the near term, either of the above products could make an interesting choice. Clearly, these could be intriguing for those with high-risk tolerance, and a belief that the “trend is the friend” in this specific corner of the investing world.

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