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10 Inverse ETFs That Gained More Than 30% Over the Past Week
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The rapidly spreading coronavirus has made investors jittery this week, sending the global market into a tailspin. Notably, the S&P 500 declined more than 7% from records set just a week ago.
This is especially true as the continued rise in the number of deadly coronavirus cases has sparked concerns about its long-term economic impact on trade, ports, supply chains and consumer confidence. In particular, a growing number of companies have warned that the epidemic will prevent them from meeting sales or profit targets for the first three months of the year.
As such, the virus will likely derail global economic growth. Per 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 (read: Coronavirus Triggers Market Bloodbath: 7 Hot Inverse ETF Areas).
This has resulted in strong demand for inverse or inverse leveraged ETFs. These products either create a short position or a leveraged short position in the underlying index through the use of swaps, options, future contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period of time, provided the trend remains a friend.
However, these funds run the risk of huge losses compared with traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of the underlying index over the longer period compared to a shorter period (such as, weeks or months).
We have highlighted 10 leveraged inverse ETFs that are up more than 30% over the past week though these involve a great deal of risk when compared to traditional products. This uptrend might continue, at least for the near term, if sentiments remain the same.
Direxion Daily Natural Gas Related Bear 3X Shares – Up 66.8%
This product provides three times inverse exposure to the ISE-Revere Natural Gas Index. It has amassed $14.2 million in its asset base and trades in solid volume of 72,000 shares a day on average. The ETF charges 95 basis points (bps) in fees per year.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares (DRIP - Free Report) – Up 65.8%
This fund seeks three times inverse exposure of the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. DRIP has accumulated $43.5 million in its asset base and trades in solid volume of more than 501,000 shares a day on average. The fund charges 95 bps in annual fees.
MicroSectors U.S. Big Oil Index -3X Inverse Leveraged ETN (NRGD - Free Report) – Up 46.7%
NRGD offers three times inverse exposure to the Solactive MicroSectors U.S. Big Oil Index. The ETN has accumulated $59.6 million in its asset base. It charges 95 bps in annual fees and trades in average daily volume of under 1,000 shares.
Direxion Daily Energy Bear 3x Shares ETF (ERY - Free Report) - Up 46.7%
This product provides three times inverse exposure to the Energy Select Sector Index. It has AUM of $27.6 million and trades in good volume nearly 307,000 shares. The ETF charges annual fee of 95 bps (read: Is the Nightmare Over for Coronavirus-Infected Energy ETFs?).
Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) – Up 42%
This ETF offers three times inverse exposure of the performance of the S&P 500 High Beta Index. It has gathered $3.7 million in AUM within four months of debut and trades in average daily volume of 6,000 shares. The fund charges 95 bps in fees per year from investors.
This ETF provides three times inverse exposure to the PHLX Semiconductor Sector Index. It charges 0.95% in annual fees and trades in average daily volume of 3.7 million shares. It manages $256.3 million in its asset base.
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) – Up 35.2%
BNKD seeks to offer three times leveraged exposure to the Solactive MicroSectors U.S. Big Banks Index. The ETN has accumulated $15.9 million in its asset base. It charges 95 bps in annual fees and trades in average daily volume of under 3,000 shares.
BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD - Free Report) – Up 34.6%
This note seeks to offer three times inverse leveraged exposure to the NYSE FANG+ Index, which is an equal-dollar weighted index targeting the highly-traded growth stocks of next-generation technology and tech-enabled companies in the technology and consumer discretionary sectors. The ETN has accumulated $24.9 million since then. It charges 95 bps in annual fees and trades in average daily volume of 324,000 shares.
This product provides three times inverse exposure to the daily performance of the Technology Select Sector Index. It has amassed about $61.5 million in its asset base while charging 95 bps in fees per year from investors. Volume is good as it exchanges around 1.4 million shares a day on average (read: Forget Virus Scare, Buy Tech ETFs on the Dip).
ProShares UltraShort Oil & Gas (DUG - Free Report) – Up 30.1%
This fund seeks two times inverse exposure to the Dow Jones U.S. Oil & Gas Index, charging investors 95 bps in fees. It has amassed $17.8 million in its asset base and trades in lower volume of more than 47,000 shares per day on average.
Bottom Line
While the strategy is highly beneficial for short-term traders, it could lead to huge losses compared with traditional funds in fluctuating markets (see: all the Inverse Equity ETFs here).
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 attractive 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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10 Inverse ETFs That Gained More Than 30% Over the Past Week
The rapidly spreading coronavirus has made investors jittery this week, sending the global market into a tailspin. Notably, the S&P 500 declined more than 7% from records set just a week ago.
This is especially true as the continued rise in the number of deadly coronavirus cases has sparked concerns about its long-term economic impact on trade, ports, supply chains and consumer confidence. In particular, a growing number of companies have warned that the epidemic will prevent them from meeting sales or profit targets for the first three months of the year.
As such, the virus will likely derail global economic growth. Per 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 (read: Coronavirus Triggers Market Bloodbath: 7 Hot Inverse ETF Areas).
This has resulted in strong demand for inverse or inverse leveraged ETFs. These products either create a short position or a leveraged short position in the underlying index through the use of swaps, options, future contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period of time, provided the trend remains a friend.
However, these funds run the risk of huge losses compared with traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of the underlying index over the longer period compared to a shorter period (such as, weeks or months).
We have highlighted 10 leveraged inverse ETFs that are up more than 30% over the past week though these involve a great deal of risk when compared to traditional products. This uptrend might continue, at least for the near term, if sentiments remain the same.
Direxion Daily Natural Gas Related Bear 3X Shares – Up 66.8%
This product provides three times inverse exposure to the ISE-Revere Natural Gas Index. It has amassed $14.2 million in its asset base and trades in solid volume of 72,000 shares a day on average. The ETF charges 95 basis points (bps) in fees per year.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares (DRIP - Free Report) – Up 65.8%
This fund seeks three times inverse exposure of the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. DRIP has accumulated $43.5 million in its asset base and trades in solid volume of more than 501,000 shares a day on average. The fund charges 95 bps in annual fees.
MicroSectors U.S. Big Oil Index -3X Inverse Leveraged ETN (NRGD - Free Report) – Up 46.7%
NRGD offers three times inverse exposure to the Solactive MicroSectors U.S. Big Oil Index. The ETN has accumulated $59.6 million in its asset base. It charges 95 bps in annual fees and trades in average daily volume of under 1,000 shares.
Direxion Daily Energy Bear 3x Shares ETF (ERY - Free Report) - Up 46.7%
This product provides three times inverse exposure to the Energy Select Sector Index. It has AUM of $27.6 million and trades in good volume nearly 307,000 shares. The ETF charges annual fee of 95 bps (read: Is the Nightmare Over for Coronavirus-Infected Energy ETFs?).
Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) – Up 42%
This ETF offers three times inverse exposure of the performance of the S&P 500 High Beta Index. It has gathered $3.7 million in AUM within four months of debut and trades in average daily volume of 6,000 shares. The fund charges 95 bps in fees per year from investors.
Direxion Daily Semiconductor Bear 3x Shares (SOXS - Free Report) – Up 40.9%
This ETF provides three times inverse exposure to the PHLX Semiconductor Sector Index. It charges 0.95% in annual fees and trades in average daily volume of 3.7 million shares. It manages $256.3 million in its asset base.
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) – Up 35.2%
BNKD seeks to offer three times leveraged exposure to the Solactive MicroSectors U.S. Big Banks Index. The ETN has accumulated $15.9 million in its asset base. It charges 95 bps in annual fees and trades in average daily volume of under 3,000 shares.
BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD - Free Report) – Up 34.6%
This note seeks to offer three times inverse leveraged exposure to the NYSE FANG+ Index, which is an equal-dollar weighted index targeting the highly-traded growth stocks of next-generation technology and tech-enabled companies in the technology and consumer discretionary sectors. The ETN has accumulated $24.9 million since then. It charges 95 bps in annual fees and trades in average daily volume of 324,000 shares.
Direxion Daily Technology Bear 3x Shares (TECS - Free Report) - Up 33.9%
This product provides three times inverse exposure to the daily performance of the Technology Select Sector Index. It has amassed about $61.5 million in its asset base while charging 95 bps in fees per year from investors. Volume is good as it exchanges around 1.4 million shares a day on average (read: Forget Virus Scare, Buy Tech ETFs on the Dip).
ProShares UltraShort Oil & Gas (DUG - Free Report) – Up 30.1%
This fund seeks two times inverse exposure to the Dow Jones U.S. Oil & Gas Index, charging investors 95 bps in fees. It has amassed $17.8 million in its asset base and trades in lower volume of more than 47,000 shares per day on average.
Bottom Line
While the strategy is highly beneficial for short-term traders, it could lead to huge losses compared with traditional funds in fluctuating markets (see: all the Inverse Equity ETFs here).
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 attractive for those with high-risk tolerance, and a belief that the “trend is the friend” in this specific corner of the investing world.
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 >>