101 Inverse ETFs To Short Any Market – But Do They Really Work?

Inverse ETFs
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As the universe of ETFs continues to grow, seemingly daily, it seems that investors and traders are getting more and more interested in these exotic products. Since you can basically create or develop an ETF for practically anything you want, the popularity of inverse ETFs has exploded as an alternative to short any market and profit in a bear market.

I have to admit; ETFs are very convenient, relatively cheap and tax friendly. And like I said before, they are much easier to understand for the traditional investor as compared to mutual funds. Some notable industry publications are convinced they will one day lead to the death of mutual funds altogether. I highly doubt that.

But, I can see why investors are in love with ETFs. Mutual funds are usually so broad based that it’s hard to gain exposure to certain sectors or industries. With ETFs however, you can easily invest in Financials (XLF), Emerging Markets (EEM) or the Energy Sector (XLE).

Inverse ETFs then are a simple way to create a short ETF position by buying an exchange traded fund. Since most investors don’t know how to short stocks (nor have the account to do it) you can now buy “short exposure” to ETFs that inversely track an underlying index or investment product.

Pretty cool, and smart right? Well…

Video Inverse ETF Warning

The more popular inverse ETFs promise to make you the exact opposite return of an underlying index. Seems like a great way to leverage a falling market right? After all, the fund's prospectus clearly guarantees the inverse of the daily return of the index. But the key word is daily. Watch this video to see why:

[youtube]http://www.youtube.com/watch?v=jUqDWlilcG0[/youtube]

Giant Inverse ETF List

New ETFs are being developed and launched every week. Some of the bigger ETFs are absolutely going to be around for a long time, while others may close down without sufficient investor support and interest. If you are interested in trading inverse ETFs, here’s a list of the top 101. Bookmarking this page might be a good idea!

  1. BGZ – Direxion Daily Large Cap Bear 3X Shares ETF
  2.  BIS – UltraShort NASDAQ Biotechnology ETF
  3.  BRIS – Direxion Daily BRIC Bear 3x Shares ETF
  4.  BXDB – Barclays Short B Leveraged Inverse S&P 500 Total Return ETN
  5.  COWS – Direxion Daily Agribusiness Bear 3x Shares ETF
  6.  DDG – Short Oil & Gas ProShares ETF
  7.  DGLD – 3x Inverse Gold ETN
  8.  DLBS – iPath US Treasury Long Bond Bear ETN
  9.  DMM – MacroShares Housing Down ETF
  10.  DNO – United States Short Oil ETF
  11.  DOG – Short Dow30 ProShares ETF
  12.  DOY – MacroShares $100 Oil Down ETF
  13. DPK – Direxion Daily Developed Markets Bear 3X Shares ETF
  14.  DSLV – 3x Inverse Silver ETN
  15.  DSTJ – JP Morgan 2X Short US Long Treasury Futures ETN
  16.  DSXJ – JP Morgan 2X Short US 10 Year Treasury Futures ETN
  17.  DUG – UltraShort Oil & Gas ProShares ETF
  18.  DUST – Direxion Daily Gold Miners Bear 3x Shares ETF
  19.  DXD – UltraShort Dow 30 ProShares ETF
  20.  EDZ – Direxion Daily Emerging Markets Bear 3X Shares ETF
  21.  EEV – UltraShort MSCI Emerging Markets ProShares ETF
  22.  EFU – UltraShort MSCI EAFE ProShares ETF
  23.  EFZ – Short MSCI EAFE ProShares ETF
  24.  ERY – Direxion Daily Energy Bear 3X Shares ETF
  25.  EUM – Short MSCI Emerging Markets ProShares ETF
  26.  EUO – ProShares UltraShort Euro ETF
  27.  EWV – UltraShort MSCI Japan ProShares ETF
  28.  PSQ – Short QQQ ProShares ETF
  29.  PST – ProShares UltraShort 7-10 Year Treasury ETF
  30.  QID – UltraShort QQQ ProShares ETF
  31.  QLD – Ultra QQQ ProShares ETF
  32.  REK – ProShares Short Real Estate ETF
  33.  RETS – Direxion Daily Retail Bear 3X Shares ETF
  34.  REW – UltraShort Technology ProShares ETF
  35.  RSW – Rydex Inverse 2x S&P 500 ETF
  36.  RUSS – Direxion Daily Russia Bear 3x Shares ETF
  37.  RWM – Short Russell2000 ProShares ETF
  38.  RXD – UltraShort Health Care ProShares ETF
  39.  SAGG – Daily Total Bond Market Bear 1x Shares ETF
  40.  SBB – ProShares Short S&P SmallCap600 ETF
  41.  SBM – ProShares Short Basic Materials ETF
  42.  SCC – ProShares UltraShort Consumer Services ETF
  43.  SCO – ProShares UltraShort DJ-AIG Crude Oil ETF
  44.  SDD – ProShares UltraShort SmallCap600 ETF
  45.  SDK – ProShares UltraShort MidCap Growth ETF
  46.  SDOW – UltraPro Short Dow 30 ETF
  47.  SDP – ProShares UltraShort Utilities ETF
  48.  SDS – ProShares UltraShort S&P500 ETF
  49.  SEF – Short Financials ProShares ETF
  50.  SFK – ProShares UltraShort Russell1000 Growth ETF
  51.  SH – ProShares Short S&P500 ETF
  52.  SICK – Direxion Daily Healthcare Bear 3X Shares ETF
  53.  SIJ – ProShares UltraShort Industrials ETF
  54.  SJB – ProShares Short High Yield ETF
  55.  SJH – ProShares UltraShort Russell 2000 Value ETF
  56.  SJL – ProShares UltraShort MidCap Value ETF
  57.  SKF – ProShares UltraShort Financials ETF
  58.  SKK – ProShares UltraShort Russell2000 Growth ETF
  59.  SMDD – UltraPro Short Mid-Cap 400
  60.  SMN – ProShares UltraShort Basic Materials ETF
  61.  SOXS – Direxion Daily Semiconductor Bear 3x Shares ETF
  62.  SPXU – ProShares Ultra Pro Short S&P 500 ETF
  63.  SQQQ – UltraPro Short QQQ ETF
  64.  SRS – ProShares UltraShort Real Estate ETF
  65.  SRTY – UltraPro Short Russell 2000 ETF
  66.  SSG – ProShares UltraShort SemiConductor ETF
  67.  SVXY – ProShares Short VIX Short-Term Futures ETF
  68.  SZK – ProShares UltraShort Consumer Goods ETF
  69.  TBF – ProShares Short 20+ Year Treasury ETF
  70.  TBT – ProShares UltraShort 20+ Year Treasury ETF
  71.  TBX – Short 7-10 Year Treasury ETF
  72.  TBZ – UltraShort 3-7 Year Treasury ETF
  73.  TLL – ProShares UltraShort Telecommunications ETF
  74.  TMV – Direxion Daily 30-year Treasury Bear 3x Shares ETF
  75.  TOTS – Direxion Daily Total Market Bear 1X Shares ETF
  76.  TPS – ProShares UltraShort TIPS ETF
  77.  TWM – ProShares UltraShort Russell2000 ETF
  78.  TYBS – Daily 20 Year Plus Treasury Bear 1x Shares ETF
  79.  TYNS – Daily 7-10 Year Treasury Bear 1x Shares ETF
  80.  TYO – Direxion Daily 10-year Treasury Bear 3x Shares ETF
  81.  TYP – Direxion Daily Technology Bear 3x Shares ETF
  82.  TZA – Direxion Daily SmallCap Bear 3x Shares ETF
  83.  TWQ – ProShares UltraShort Russell 3000 Index ETF
  84.  UDN – PowerShares US Dollar Bearish ETF
  85.  YCS – ProShares UltraShort Yen ETF
  86.  YXI – Proshares Short FTSE / Xinhua China 25 ETF
  87.  ZSL – ProShares UltraShort Silver ETF
  88.  FAZ – Direxion Daily Financial Bear 3X Shares ETF
  89.  FXP – UltraShort FTSE/Xinhua China25 Proshares ETF
  90.  GASX – Direxion Daily Natural Gas Related Bear 3X Shares ETF
  91.  GLL – UltraShort Gold ProShares ETF
  92.  INDZ – Direxion Daily India Bear 3x Shares ETF
  93.  IPAL – 2x Inverse Palladium ETN
  94.  IPLT – 2x Inverse Platinum ETN
  95.  KRS – Short KBW Regional Banking ETF
  96.  KOLD – UltraShort DJ-UBS Natural Gas ETF
  97.  LHB – Direxion Daily Latin America 3x Bear Shares ETF
  98.  MATS – Direxion Daily Basic Materials Bear 3X Shares ETF
  99.  MWN – Direxion Daily Mid Cap Bear 3X Shares ETF
  1. MYY – Short MidCap400 ProShares ETF
  2. MZZ – UltraShort MidCap400 ProShares ETF

How To Choose Your Most Suitable Inverse ETF

Let’s face it. With such a wide variety of inverse ETFs to choose from, it’s easy to get overwhelmed when trying to decide which of them best suits your needs/strategy. As such, I’ll list four important questions to ask yourself when seeking to buy your ETFs.

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What’s The ETFs Underlying Instrument?

This is perhaps the most important question that any inverse ETFs investor or buyer need to ask themselves. What exactly are you looking to buy? While this may seem a little obvious, it is vital that you have a clear cut objective of what you target for your strategy. You need to take a keener look at the products available and make your choice depending on your investment objectives. For example, if you're looking for gold exposure, then it’s important that you be conversant with the several gold ETFs available in the market to help you understand how each achieves its objectives.

Does It Have a Balanced Portfolio?

Like I had mentioned earlier, ETFs tend to be quite cheap to buy yet offer numerous diversification benefits. However, not all are well diversified. Take this for example; emerging markets ETFs are often dominated by large cap stocks and multinational giants. This way, a majority of them rarely reflect the local economy. In fact, most of their inverse ETFs lack the diversification benefits associated with international investing. So, before buying into any position, it’s important for you to consider various factors such as major allocations to a particular country, a single stock, or sector as this could significantly impact a fund’s risk/return profile.

Are There Better Options?

One of the best things about the ETF industry is the luxury of choice that it provides investors. In such a case, you need to shop and see what gives you the best value for money since there are a lot of alternatives to choose from. So, if you’re planning to buy an inverse ETF, be sure to do your homework to find out which among the several alternatives available helps you save money over the long haul.

How Liquid Is The ETF?

As with any financial instrument, liquidity plays a critical role whenever a trader is looking to make any investment. As such, it’s crucial that you take note of your preferred ETFs’ average trading volumes to understand how frequently it trades. As a rule of thumb, avoid low-volume ETFs. And even when you’ve found a product that meets your liquidity criteria, always use a limit order when establishing your position.

Do you have any experience trading inverse ETFs? Please share your thoughts in the comment box below. We’d like to hear from you as well.

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.