TActual allocation doesn’t necessarily mean strategies need to be complex algorithms or factor-based. Inverse exchange-traded fund (ETFs), which can be redirected in the opposite direction, can offer traders the opportunity to make gains.
Volatility has been a constant in the current market environment. Markets will respond to any news, whether it’s rising rates, inflation, geopolitical concerns or a combination of all these factors.
How volatile have the markets been lately? The CBOE Volatility Index or simply the VIX is up almost 70% for the year, highlighting the rollercoaster ride stock market investors have been going through.
However, traders do not have to be bullish to make money trading major stock markets indexes such as the S&P 500. The aforementioned factors have caused investors to feel jittery and the index has fallen 9% so far in 2014.
Trades can use the S&P 500 to profit on the downside in the near term. Direxion Daily S&P Bear 3X ETF SPXS (SPXS).. SPXS seeks daily investment returns equal to 300% of S&P 500 Index’s inverse.
Bonds can capture the bearishness of bonds
Bond prices and yields move in opposite directions. Market news that investors are becoming jittery about rising yields is a good time to trade bearishness in bonds.
One option is to use Direxion Daily 7-10 year Treasury Bear 3X shares (TYO). It increases exposure to its index by triple the exposure, just like SPXS.
TYO’s fund description states that it seeks daily investment results without fees and expenses equal to 300% of the inverse or opposite of the daily performance for the ICE U.S. Treasury7-10 Year Bond Index. The index is market-weighted and includes U.S. Treasury securities that have a remaining maturity greater than seven years or less than or equal 10 years.
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These views and opinions are solely the author’s and do not necessarily reflect the views of Nasdaq, Inc.
