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A Conservative Way To Short The S&P 500

June 10, 2016 9:21 am
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A Conservative Way To Short The S&P 500

Direxion, the second-largest issuer of inverse and leveraged exchange-traded funds, might be known for more adventurous fare such as the Direxion Daily S&P Biotech Bull 3X Shares (NYSE: LABU), Direxion Daily Gold Miners Index Bull 3X Shares (Direxion Shares Exchange Traded Fund Trust (NYSE: NUGT)) and the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ).

However, the issuer has more docile offerings that are not leveraged. Direxion added to that lineup earlier this week with the launch of the Direxion Daily S&P 500 Bear 1X Shares (NYSE: SPDN), an inverse though not leveraged play on the S&P 500.

SPDN’s Strategy

So if SPDN behaves intended, on days when the S&P 500 falls 1 percent, the new Direxion ETF should rise by that amount.

Related Link: Janus Unveils Big Thematic ETF Push

“With the S&P 500 near all-time highs and trepidation about the future of the global economy, wealth managers are thinking about how to position portfolios for market pullbacks and increased volatility,” said Sylvia Jablonski, managing director at Direxion, in a statement.

“SPDN allows tactical managers to capitalize on changing markets by taking an inverse view, or seeking downside protection in a simple, flexible and low-cost way.”

Of course, Direxion offers leveraged S&P 500 plays, such as the Direxion Large Cap Bull 3X Shares (ETF) (NYSE: SPXL) and the Direxion Daily Large Cap Bear 3X Shares (NYSE: SPXS).

SPDN is a more cost-effective option for traders looking to make a long-term commitment to shorting the S&P 500, though inverse and leveraged ETFs are not meant to be long-term instruments. SPDN charges just 0.45 percent a year, or $45 per $10,000 invested. Leveraged ETFs, such as SPXL and SPXS charge 0.95 percent per year.

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