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3 ETFs To Short The Dow

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3 ETFs To Short The Dow

With last Friday's 4.55% slide, the Dow Jones Industrial Average erased all of the gains accrued since President Trump won the 2016 election. Using the SPDR Dow Jones Industrial Average ETF (NYSE: DIA) as the guide, the blue-chip index enters Monday 35.14% below its 52-week high.

Traders considering bearish and inverse leveraged exchange traded funds on the Dow would clearly be onto something, particularly with Dow futures swooning again Sunday evening. Things are so bad in fact for the index to start 2020 that each of the benchmark's 30 components are in the red and 25 of those stocks are down 20% or more.

That could be a sign the once beloved Dow could be in for more near-term downside, bringing with it opportunity in the following bearish ETFs.

See Also: The Most Shorted ETFs Amid The Coronavirus Market Crash

ProShares Short Dow30 (DOG)

The ProShares Short Dow30 (NYSE: DOG) is a good idea for risk-averse investors that are looking for short-term hedges or to participate in some of the broader market's downside. DOG is an inverse though not leveraged fund, meaning it should deliver a gain of 1% on a day in which the Dow loses 1%.

With Boeing's (NYSE: BA) rapid fall from grace, DOG is now an interesting way of hedging long bets in stocks such as Apple (NASDAQ: AAPL) and UnitedHealth (NYSE: UNH), which are now the Dow's top two stocks.

Remember that the Dow is a price-weighted, not a cap-weighted index, meaning the stock with the largest price tag takes on the largest weight in the in benchmark.

ProShares UltraPro Short Dow30 (SDOW)

Some bearish leveraged ETFs are thriving in the current environment and the ProShares UltraPro Short Dow30 (NYSE: SDOW) is certainly part of that club. Last Friday, SDOW gain 12.83% on nearly double the average daily volume, meaning the bearish Dow fund has more than doubled just this month. That's tempting, but traders should still treat SDOG as they would any other leveraged ETF.

“Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period,” according to ProShares.

Direxion Daily Technology Bear 3X Shares (TECS)

Clearly, the first two bearish ETFs highlighted here are dedicated Dow plays. Obviously, the Direxion Daily Technology Bear 3X Shares (NYSE: TECS) is an inverse technology play and not focused on the Dow Jones Industrial Average.

However, there are relevant tie ins. With Boeing's slide, the industrial sector is losing prominence in the Dow while tech is now the benchmark's biggest sector weight at 24.44%.

TECS looks to deliver triple the daily inverse returns of the Technology Select Sector Index, a benchmark that devotes almost 40% of its weight to Apple and Microsoft (NASDAQ: MSFT). That index is also home to four more Dow components: Visa (NYSE: V), Intel (NASDAQ: INTC), Cisco (NYSE: CSCO) and IBM (NYSE: IBM).

So yes, TECS is a fine way for active traders to put on short-term, bearish Dow positions.

 

Related Articles (DIA + DOG)

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