Introduction
Many well-known exchange-traded funds (ETFs) aim to replicate the performance of a specific index, but there are other types of ETFs that differ in structure. Two of these types include leveraged ETFs and inverse ETFs. Some investors are looking for funds that use both leveraged and inverse trading strategies. If you belong to this category of investors or just want to learn more about these products, keep reading for an overview and a list of inverse leveraged ETFs.
What are Inverse Leveraged ETFs?
As the name suggests, inverse leveraged ETFs combine the high-risk trading strategies of both leveraged ETFs and inverse ETFs. It is best to approach each concept separately to understand how they work together.
Leveraged ETFs
While a traditional ETF seeks to replicate the performance of a specific index, a leveraged ETF aims to achieve multiple returns based on that index’s performance. For example, the ProShares Ultra S&P500 (SSO) tries to double the earnings of the S&P index. If the S&P index rises by 1% on a given day, SSO would theoretically generate a return of 2%.
Inverse ETFs
Inverse ETFs aim to achieve the opposite performance of a specific index. In other words, they are a bearish investment that mimics a short position on an index. An example of this is the ProShares Short S&P500 (SH), which seeks a ratio of 1 to -1 with the S&P 500 index. If the S&P 500 index loses 1% on a particular day, SH would theoretically generate a return of 1%. When an inverse ETF seeks to achieve multiple returns on a short position, it becomes an inverse leveraged ETF.
Note
It’s important to remember that all of these products are intended for advanced investors who are comfortable with taking on higher levels of risk. Unlike traditional ETFs, the components of these funds can vary significantly and may include complex securities like swaps and futures. It is essential to research any investment funds that interest you, consider the risks, and have a plan for how an inverse leveraged ETF fits into your overall investment portfolio.
Inverse Leveraged ETFs
Below are several inverse leveraged ETFs available for your portfolio. The indices tracked here range from biotechnology to treasury bonds to the Chinese yuan. As with any investment, it’s best to conduct further research and consult your financial advisor before purchasing any of these investment products. These funds aim for -2x to -3x returns of the underlying index for a single day.
BIS: ProShares UltraShort Nasdaq Biotechnology ETF (-2x)
BZQ: ProShares UltraShort MSCI Brazil Capped ETF (-2x)
DRIP: Direxion Daily S&P Oil & Gas Exp. & Prod. Bull and Bear 2x Shares ETF (-2x)
DRV: Direxion Daily Real Estate Bull and Bear 3x Shares ETF (-3x)
DUG: ProShares UltraShort Oil & Gas ETF (-2x)
DXD: ProShares UltraShort Dow30 ETF (-2x)
EDZ: Direxion Daily MSCI Emerging Markets Bull and Bear 3x Shares ETF (-3x)
EEV: ProShares UltraShort MSCI Emerging Markets ETF (-2x)
EPV: ProShares UltraShort FTSE Europe ETF (-2x)
ERY: Direxion Daily Energy Bull and Bear 2x Shares ETF (-2x)
EUO: ProShares UltraShort Euro ETF (-2x)
FAZ: Direxion Daily Financial Bull and Bear 3x Shares ETF (-3x)
FXP: ProShares UltraShort FTSE China 50 ETF (-2x)
GLL:
ProShares UltraShort Gold ETF (-2x)
JDST: Direxion Daily Junior Gold Miners Index Bull and Bear 2x Shares ETF (-2x)
KOLD: ProShares UltraShort Bloomberg Natural Gas ETF (-2x)
LABD: Direxion Daily S&P Biotech Bull and Bear 3x Shares ETF (-3x)
PST: ProShares UltraShort 7-10 Year Treasury ETF (-2x)
QID: ProShares UltraShort QQQ ETF (-2x)
SCO: ProShares UltraShort Bloomberg Crude Oil ETF (-2x)
SDOW: ProShares UltraPro Short Dow30 ETF (-3x)
SDS: ProShares UltraShort S&P500 ETF (-2x)
SKF: ProShares UltraShort Financials ETF (-2x)
SOXS: Direxion Daily Semiconductor Bull and Bear 3x Shares ETF (-3x)
SPXS: Direxion Daily S&P 500 Bull and Bear 3x Shares ETF (-3x)
SPXU: ProShares UltraPro Short S&P500 ETF (-3x)
SQQQ: ProShares UltraPro Short QQQ ETF (-3x)
SRS: ProShares UltraShort Real Estate ETF (-2x)
SRTY: ProShares UltraPro Short Russell2000 ETF (-3x)
SVXY: ProShares Short VIX Short-Term Futures ETF (-0.5x)
TBT: ProShares UltraShort 20+ Year Treasury ETF (-2x)
TTT: ProShares UltraPro Short 20+ Year Treasury ETF (-3x)
TWM: ProShares UltraShort Russell2000 ETF (-2x)
TYO: Direxion Daily 7-10 Year Treasury Bull and Bear 3x Shares ETF (-3x)
TZA: Direxion Daily Small Cap Bull and Bear 3x Shares ETF (-3x)
YANG: Direxion Daily FTSE China Bull and Bear 3x Shares ETF (-3x)
YCS: ProShares UltraShort Yen ETF (-2x)
ZSL: ProShares UltraShort Silver ETF (-2x)
Conclusion
Inverse leveraged exchange-traded funds are advanced products that use leveraged and inverse trading strategies. These funds employ leverage (through short selling or debt) and track the inverse of an index and complex securities to achieve profits when the index they track declines. Investors interested in these funds should be aware of the high risks associated with them and be prepared to take on those risks. Before investing in any leveraged inverse exchange-traded fund, thorough research should be conducted, and consultation with your financial advisor is recommended.
Source: https://www.thebalancemoney.com/list-of-leveraged-inverse-etfs-1215227
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