Proshares Ultra Short and Ultra Long ETFs

July 10, 2008 - (Courtesy: Bespoke Investment Group) Market participants know that the ProShares Short and UltraShort ETFs have become wildly popular.  These ETFs allow investors with long-only accounts to easily bet against the market or hedge their bets.  The ProShares Ultra ETFs provide either double or double the inverse of the daily returns of the asset classes they track.  In the current market environment, the UltraShort ETFs have been huge winners.

For those interested, below we highlight all of the ETFs currently offered by ProShares.  We also include the year-to-date performance of each one, along with its current percentage from its 50-day moving average (to measure overbought/oversold levels).  As shown, the Ultrashort Financial ETF (SKF) is up a whopping 67% year to date, as financial firms have fallen across the board.  SKF is trailed by the Ultrashort Semiconductors (SSG), Ultrashort Russell 1,000 Value (SJF), and Ultrashort Dow30 (DXD) as far as year-to-date performance is concerned.

Because the ETFs attempt to track the daily performance of the underlying indices, the longer-term performances can get out of whack.  Not taking dividends into account, the Ultrashort Oil&Gas ETF (DUG) is down 12.45% year to date, but the Ultra (long) Oil&Gas ETF (DIG) is down 7.29%.

GreenLightAdvisor Note: In addition to the obvious, one interesting way to buy some portfolio insurance without the layout may be to buy call options on the corresponding ETFs. For example, on a short term basis, if you wanted to protect your gains from the recent run up in commodities without having to make a big commitment, buy call options in SMN Ultrashort Basic Materials, instead of the ETF itself.

If your bet is wrong, worse case scenario, you're out the premium; if you're right, on the other hand, you collect thus reducing your downside, depending on your strike price, of course.





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