5 Inverse ETFs Making Hay Amid Tech Rout
Technology stocks were hit hard on Oct 10, logging their worst day in more than seven years, as part of the broad-based selloffs. The sector was one of the most hurt because it was hot and soaring this year and investors’ favorite destination. So, amid global market bloodbath, sectors that are guilty of overvaluation concerns were mainly clobbered.
The S&P 500 Information Technology Index shed 4.85% on Oct 10, marking the biggest decline since Aug 18, per CNBC. All 65 members of the index were in the red on that day. Shares of Apple AAPL, Microsoft MSFT, Amazon AMZN, Facebook FB and Twitter TWTR were down 4.6%, 5.4%, 6.2% 4.1% and 8.5%, respectively, on Oct 10. Advanced Micro Devices Inc. AMD, which has skyrocketed about 150% in 2018, slid 8.2% on Oct 10, and lost the most on the index.Technology Select Sector SPDR ETF (XLK) retreated about 6.1% in the last two days (read: 5 Tech ETFs That Tumbled Most on Broad Market Rout).
Going forward, these big names are likely to drop as and when global market selloff crops up as this high-flying space will correct itself. The negative sentiment is likely to continue at least in the near term if the Fed remains super-hawkish on upbeat economic data.
Price-to-earnings ratio is at 32.31x in the third quarter of 2018 for Technology Sector, trailing only Healthcare. Among technology, communications equipment (P/E of 114.79x), computer networks (363.71x) and computer processing, cloud services (P/E of 95.75x) and software programming (59.35x) boast loft valuations.
Given this, investors can easily tap any bearish trend by considering a near-term short on the technology sector. Fortunately, with the advent of ETFs, this is quite easy as there are a few options to accomplish this task. Below we highlight them and some of the key differences between each.
ProShares UltraShort Technology (REW)
This fund seeks two times (2x) inverse exposure to the Dow Jones U.S. Technology Index, charging 95 bps in fees. REW has returned about 11.4% over the last two days (as of Oct 11, 2018).
MicroSectors FANG+ -3X Inverse Leveraged ETN (FNGD)
The note is linked to the performance of the NYSE FANG+ Index. The underlying index includes 10 highly liquid stocks that represent a segment of the technology and consumer discretionary sectors consisting of highly traded growth stocks of technology and tech-enabled companies. The fund charges 95 bps in fees. The fund gained about 18.6% in the last two days (read: Explore FANG+ With These New ETFs).
Direxion Daily Technology Bear 3x Shares (TECS)
Investors with a more bearish view and a higher risk appetite may find TECS interesting as the product provides three times (3x) inverse exposure to the daily performance of the Technology Select Sector Index. The fund gained 18.7% in the same time frame.
ProShares UltraShort Semiconductors ETF (SSG)
This fund targets the semiconductor corner of the broader technology sector as it provides two times inverse exposure to the daily performance of the Dow Jones U.S. Semiconductors Index. Expense ratio comes in at 0.95%. The fund added 10.9% in the same time frame.
Direxion Daily Semiconductor Bear 3x Shares (SOXS)
This ETF offers three times inverse exposure to the PHLX Semiconductor Sector Index, charging investors 95 bps in annual fees. The fund surged 16.8% in the same time frame.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
Twitter, Inc. (TWTR) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
SPDR-TECH SELS (XLK): ETF Research Reports
PRO-ULS TECH (REW): ETF Research Reports
DIR-D SM BR 3X (SOXS): ETF Research Reports
DIR-TEC BEAR3X (TECS): ETF Research Reports
PRO-ULS SEMICON (SSG): ETF Research Reports
BMO-RM FG I3XIL (FNGD): ETF Research Reports
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