Category Archives: Inverse ETFs

SEC Regulation of Leveraged Short ETFs Coming?

Jim Cramer has long been calling for a ban of the leveraged short ETFs and in a Reuters article SEC chairwoman Mary Schapiro said she’s concerned with the lack of oversight with leveraged short ETFs saying the funds have been “scrutinized inadequately”.  She said  that staff would be added to deal with the enormous complexity of some of the more elaborate ETFs that have hit the market recently which include commodity ETFs. 

Critics such as Cramer contend that ETF’s that let investors short sectors with leverage are dangerous for individuals and the overall market and that some savvy investors are using  them to force segments of the market such as financials to fall faster than they would if just based on fundamentals alone.  There are also concerns  that many of these ETFs don’t perform as advertised.  This might explain why Direxion recently made changes to the naming of their ETFs to reflect the returns based on daily performance.  Many articles have been written recently highlighting the under performance of the leveraged ETFs over longer time periods to which I’ll say again…  know what you’re trading at all times. The leveraged ETFs are better suited to short term hedging and momentum plays.

The Inverse ETF

The inverse ETF has become a popular way to hedge, particularly with the 2x and 3x leveraged inverse ETF’s offered by ProShares and Direxion.  These inverse ETFs offer investors a way to hedge their portfolios by going short without the need for using options or shorting by borrowing shares in a margin account.  Another advantage is being able to diversify on the short side within an entire sector such as financials and energy, allowing you to hone in on the weakest areas of the market while maintaining long positions in area of strength.  Never before has the retail investor been given so many options to protect themselves in deteriorating markets. 

Below is a list of the most popular leveraged inverse ETFs from PowerShares and Direxion.  Keep in mind this entire list is made of INVERSE ETF’s .. so they will move up when that particular market moves down.  Most are offered by ProShares unless noted.  The average number of shares traded per day is as of Dec 15th 2008.  On a final note, be careful with these.. they can move quickly!


Leveraged Inverse ETF Ticker Avg Shares Traded/Day*


QQQQ 2x QID 45441K
Dow 30 2x DXD 16782K
SP 500 2x SDS 66035K
MidCap 400 2x MZZ 1190K
Small Cap 600 2x SDD 70K
Russell 2000 2x TWM 9038K
Large Cap Bear 3x (Direxion) BGZ 2728K
Small Cap Bear 3x (Direxion) TZA 1522K


Basic Materials 2x SMN 4252K
Gold 2x GLL 9K
Oil & Gas 2x DUG 21287K
Crude Oil 2x SCO 55K
Energy 3x (Direxion) ERY 377K
Industrials 2x SIJ 79K
Consumer Goods 2x SZK 51K
Consumer Services 2x SCC 172K
Real Estate 2x SRS 8430K
Financials 2x SKF 25638
Financials 3x (Direxion) FAZ 1900K
Semiconductors 2x SSG 66K
Utilities 2x SDP 34K
Technology 2x REW 111K

Fixed Income

Lehman 7-10 YR Treasury 2x PST 62K
Lehman 20+ YR Treasury 2x TBT 997K


Euro/US 2x EUO 25K
Yen/US 2x YCS 3.5K

* As of December 15th, 2008