Traders Profiting from the Pullback with Reverse ETFs (HPQ, VZ, DPK, ERY, EEV, FXP, SDS, DXD, QID)
Stocks were painted in red on Tuesday after missile attacks in Korea gave traders an excuse to sell-off ahead of thin volume around the Thanksgiving market holiday. While there was relatively little safety in the major benchmarks — Hewlett-Packard (HPQ) and Verizon Communications (VZ) were the only Dow winners at the time of this writing — select ETF traders were profiting from the pullback with bets against various corners of the market.
A look at the Leveraged ETFs Index shows that select “reverse” or “short” ETFs, which are designed to track the inverse performance of a particular sector or index, are surging by 5% or more today.
Top performers include volatile 3x leveraged ETFs like the Developed Markets Bear 3X Shares (DPK) and Direxion Shares ETF Trust Energy Bear 3x (ERY), which are gaining more than 7% for the session, and traders are gaining more than 5% today with bets on the UltraShort MSCI Emerging Markets ProShares (EEV) and UltraShort FTSE Xinhua China 25 ProShares (FXP). Investors should note that 3x ETFs, and other highly volatile securities are recommended for day-trading purposes only, as getting caught on the wrong side of a longer-term bet could mean serious losses for inactive investors.
It will be interesting to see where stocks go once the dust settles in Korea. Investors betting on a continued pullback, or a rebound from the dip, can look to track the Leveraged ETFs Index for exchange-traded plays on either side of the bet at tickerspy.com.
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