Betting on Stock Market Downturn
It's not easy to be in the stock market in the past few days and weeks. I had a feeling that the stock market recovered a bit too high too soon. I should have capitalized on that. How? By betting that it will correct itself. How do you do that? By "shorting," which is a way to make money when a stock goes down: you're basically betting that a stock will go down, and when it does, you make money. I just discovered that there are now ETFs designed specifically for that purpose. That's a very good investor's resource, in my opinion.
Here are a few ETFs that do the "shorting" for you:
ProShares Ultrashort (QQQ) - rewards a fall in the Nasdaq;
Proshares Ultrashort S&P 500 (SDS)- rewards a fall in the S&P benchmark
Proshares Ultrashort Dow 30 (DXD) - rewards the fall in the bluechip industrials.
Rydex recently rolled out eight new ETFs, half of which offer double-inverse plays on the energy, financial, health care and technology sectors. The Rydex Inverse 2x Select Sector Financial (RFN) - up more than 8 percent in light Thursday trading.
Keep in mind that "shorting" can cause unlimited losses: if stocks go up, you lose. But these ETFs do limit the risk somewhat and that is a very good think.
Reference
Shorting Stocks Could Be Way to Play This Market, cnbc.com article
