Back to top

Image: Bigstock

Coronavirus Triggers Market Bloodbath: 7 Hot Inverse ETF Areas

Read MoreHide Full Article

Wall Street, which has so far been pretty resilient to the coronavirus scare, suffered a bloodbath on Feb 24. This is mainly because of the spike in cases outside China that has fueled possibilities of the virus turning into an acute pandemic.

Notably, Iran, Italy and South Korea reported a rise in the number of infected cases over the weekend. As a result, the S&P 500 and the Dow Jones Industrial Average suffered their biggest single-day percentage losses in two years on Feb 24.

The CBOE Volatility Index scaled to the highest level in more than a year. The volatility index gained for three successive days in percentage terms, marking the seventh-biggest move ever.

The benchmark S&P 500, which makes up for more than 44% of the market capitalization of all global equities, lost $927 billion of value on Feb 24, according to S&P Dow Jones Indices senior analyst Howard Silverblatt, as quoted on Reuters.

Key U.S. ETFs like SPDR S&P 500 ETF Trust SPY, SPDR Dow Jones Industrial Average ETF Trust DIA, Invesco QQQ Trust (QQQ - Free Report) slumped about 3.3%, 3.5% and 3.9%, respectively, while volatility-measuring product iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX - Free Report) added about 18.7% (read: Here's Why You Should Bet on Quality ETFs & Stocks).

Against this backdrop, we highlight a few inverse ETF areas that gained considerably on Feb 24 and may be in the spotlight if the sell-off lingers.

S&P 500

Investors can go against the S&P 500 with ProShares Short S&P500 ETF (SH - Free Report) gaining 3.5% and Direxion Daily S&P 500 Bear 1X Shares (SPDN - Free Report) rising 3.3% on Feb 24 (read: Looking to Buy the Dip? Play These Top-Ranked ETFs).

Dow Jones

Dow Jones is an extremely trade-sensitive index and thus shares considerable co-relation with China and also with other countries. So, investors intending to play against the tumbling Dow Jones, may tap ProShares Short Dow 30 (DOG - Free Report) (up 3.5%), ProShares UltraShort Dow30 DXD (up 7.0%) and ProShares UltraPro Short Dow30 (SDOW - Free Report) (up 10.5%).


ProShares Short QQQ (PSQ - Free Report) (up 3.8%), ProShares UltraShort QQQ QID (up 7.7%) and ProShares UltraPro Short QQQ SQQQ (up 11.6%) are good to play against the Nasdaq.


U.S. semiconductor companies have huge revenue exposure to China, making the sector susceptible to the coronavirus onslaught. While regular semiconductor ETF iShares PHLX Semiconductor ETF (SOXX - Free Report) lost 4.8% on Feb 24, inverse semiconductor ETFs Direxion Daily Semiconductor Bear 3x Shares SOXS gained 14.2% on Feb 24 (read: Forget Coronavirus, Semiconductor ETFs Are a Buy).


Obviously, businesses are suffering the most in China. iShares MSCI China ETF (MCHI - Free Report) lost 3.3% on Feb 24. So, some of the China-related inverse plays that can be gainful are Direxion Daily CSI 300 China A Share Bear 1X Shares CHAD (up 2.1%), Direxion Daily FTSE China 3x Bear Shares YANG (up 10.1%) and ProShares UltraShort FTSE China 50 FXP (up 6.9%).

Emerging Markets

As China is the epicenter of the disease, the impact of the contagion was heavily-felt by emerging markets (EM). The stronger U.S. dollar is also working against the EM bloc. iShares MSCI Emerging Markets ETF EEM retreated about 3.7% on Feb 24. As a result, inverse EM fund Direxion Daily MSCI Emerging Markets Bear 3X Shares (EDZ - Free Report) added 11.5% on Feb 24 and ProShares Short MSCI Emerging Markets (EUM - Free Report) gained 3.8%.

Developed Markets

As the number of cases is rising globally, EAFE (Europe, Australasia and Far East) fund iShares MSCI EAFE ETF (EFA - Free Report) lost about 4% on Feb 24. Meanwhile, inverse ETF ProShares Short MSCI EAFE EFZ added 3.9% on the day.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>