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Bears Speculate on Reversal with Short S&P 500 ETF


SDS (ProShares UltraShort S&P 500, Expense Ratio 0.95%) calls traded actively earlier this week, and being that this is a daily leveraged inverse product, flows like this usually involve very short term speculation on equity market reversals, as we have seen such activity from time to time in this particular product.

Additionally, the nearly $2 billion fund has taken in about $70 million in recent sessions in terms of net inflows.

The SPX (S&P 500 Index) has traded as high as 1556.77 (yesterday in fact), marking its multi-year intraday high and our market technician David Chojnacki has recently noted that the Index has technical resistance in the 1562- 1565 range.

In recent sessions there has been a pick-up in institutional hedging and/or bearish speculation in terms of options flows, which we have documented in our daily recaps.

Products that have seen an uptick in activity include many of the broad “beta” ETFs such as SPY (SPDR S&P 500, Expense Ratio 0.09%), IWM (iShares Russell 2000, Expense Ratio 0.28%), and EFA (iShares MSCI EAFE, Expense Ratio 0.34%) for instance, and for aggressive trading and/or hedging purposes, we have seen increased usage in ETFs such as SDS (as well as their options).

Other “bear” or inverse products that track broad domestic equity indices that will also likely see an uptick if 2013’s equity rally peters out include SPXS (Direxion Daily S&P 500 Bear 3X, Expense Ratio 0.95%), TZA (Direxion Daily Small Cap Bear 3X, Expense Ratio 0.95%), SRTY (ProShares UltraPro Short Russell 2000, Expense Ratio 0.95%), SPXU (ProShares Ultra Pro Short S&P 500, Expense Ratio 0.95%), and TWM (ProShares UltraShort Russell 2000, Expense Ratio 0.95%) among others.

ProShares UltraShort S&P 500


For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.