Tactical allocation doesn’t mean strategies must involve complicated algorithms or factor-based solutions. With inverse exchange traded funds (ETFs), traders can make gains by simply moving in the opposite direction.
Volatility is a constant in today’s market environment. Whether it’s inflation, rising rates, the pandemic, geopolitical concerns, or a confluence of all those factors, markets will move with the 24-hour news cycle.
How volatile has the market been in recent months? The CBOE Volatility Index or simply the VIX is up almost 70% for the year, illustrating the roller coaster ride stock-market investors have been on.
That said, traders don’t have to be bulls to make money when trading a major stock market index such as the S&P 500. The above factors are causing investors to feel jittery, and the index is currently down 9%.
Trades can use the S&P 500 to profit on the downside in the near term. Direxion Daily S&P500 Bear 3X ETF(SPXS). SPXS seeks daily investments results equal to 300% inverse of the S&P 500 Index Index’s daily performance.
Bonds can capture the bearishness of bonds
Bond prices and yields move in opposite directions. When market news hits that investors are jittery because yields are rising, it’s an opportune time to trader bearishness in bonds.
You can also use the Direxion Daily 7-10 year Treasury Bear 3X shares (TYO). It amplifies exposure to its index, similar to SPXS, but with triple the exposure.
TYO seeks daily investment performance before fees and expenses of 300%. This is in line with the daily performance of ICE U.S. Treasury 7-10 Year Bond Index. The index is a market-weighted index and includes U.S. Treasury securities with a remaining maturity greater or equal to seven years.
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