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An inverse or short ETF is an ETF that tracks an index, but the ETF tries to go up or down in the opposite direction of the index. This gives the ETF investor a tool to try to make money when the stock market is going down or when individual sectors or industries are going down. For example, SH, the ProShares Short S&P 500 ETF, tracks the S&P 500 Index, but it moves in the opposite direction:
Inverse ETPs have become very popular:
| Category | Count |
|---|---|
| 1 | |
| Alternatives | 1 |
| Commodities | 10 |
| Global Equity | 20 |
| US Equity | 49 |
| US Fixed Income | 8 |
| Total | 89 |
Inverse ETPs use different amounts of leverage:
| Leverage factor | Count |
|---|---|
| -3.00 | 25 |
| -2.00 | 40 |
| -1.00 | 24 |
| Total | 89 |
Inverse ETPs by type:
| ETP Type | Count |
|---|---|
| ETF | 81 |
| ETN | 8 |
| Total | 89 |
Average daily trading volume by category:
| Category | Average Trading Volume |
|---|---|
| 987,738 | |
| Alternatives | 3,543,116 |
| Commodities | 5,771,823 |
| Global Equity | 21,961,534 |
| US Equity | 381,045,275 |
| US Fixed Income | 9,152,707 |
| Total | 422,462,193 |
Inverse ETFs typically achieve their inverse exposure using swap agreements. A swap agreement is a private agreement with one of the major international investment banks like UBS, Credit Suisse, Morgan Stanley and Goldman Sachs. Some ETF sponsors actually disclose on their website who the swap agreements are with, while other ETF sponsors do not (those ETF sponsors merely list "S&P 500 index swap" as a holding, without mentioning the investment bank that it is with).
You can visit the home page of each ETF if you would like to read a little more about how they are trying to do it. Almost every inverse ETF's home page has a "current holdings" or "daily holdings" page that will show you exactly what they are buying.
Keep in mind that inverse ETNs don't hold any assets, since an ETN is just a debt instrument issued by a bank that follows an index -- read more about ETNs), so it is easy for an ETN to be an inverse ETN.
It can be difficult to figure out how to effectively trade an inverse ETF, especially an inverse stock ETF. Remember, over long periods of time, the U.S. stock market always goes up. So using an inverse ETF to trade the U.S. stock market is difficult, because you are making a trade that is counter to the long-term trend. Using an inverse stock market ETF requires a degree of market timing that is extremely difficult. So obviously, inverse ETFs are considered to be short-term trading tools only that need to be carefully monitored and used.
At times, the huge volume of trading in inverse ETFs seems hard to believe, especially when the U.S. stock market has been in a 7 or 8 year bull run. Here are the most actively traded inverse ETFs:
| Symbol | Description | Leverage factor | Category | Average volume |
|---|---|---|---|---|
| SQQQ | ProShares UltraPro Short QQQ (3x) ETF | -3.00 | US Equity | 101,902,900 |
| SOXS | Direxion Daily Semiconductor Bear (3x) ETF | -3.00 | US Equity | 47,383,927 |
| SH | ProShares Short S&P 500 ETF | -1.00 | US Equity | 36,657,871 |
| SPXS | Direxion Daily Large Cap Bear (3x) ETF | -3.00 | US Equity | 33,980,262 |
| SPXU | ProShares UltraPro Short S&P500 ETF | -2.00 | US Equity | 32,824,199 |
| PSQ | ProShares Short QQQ ETF | -1.00 | US Equity | 32,132,376 |
| QID | ProShares UltraShort (2x) QQQ ETF | -2.00 | US Equity | 15,694,225 |
| SDOW | UltraPro Short Dow30 (3x) ETF | -3.00 | US Equity | 14,451,345 |
| TZA | Direxion Daily Small Cap Bear (3x) ETF | -3.00 | US Equity | 13,764,746 |
| SDS | UltraShort (2x) S&P 500 ETF | -2.00 | US Equity | 9,059,013 |
| LABD | Direxion Daily S&P Biotech Bear 3X ETF | -3.00 | US Equity | 7,642,273 |
| SPDN | Direxion Daily S&P 500 Bear 1x Shares ETF | -1.00 | US Equity | 5,845,061 |
| FAZ | Direxion Financial Bear 3x Shares ETF | -3.00 | US Equity | 5,820,102 |
| YANG | Direxion China Bear (3x) ETF | -3.00 | Global Equity | 5,430,055 |
| JDST | Direxion Daily Junior Gold Miners Index (2x) Bear ETF | -2.00 | Global Equity | 5,269,040 |
Inverse ETFs are being used in different ways, depending on the type. So let's discuss a few of the most active types of inverse trades.
Equities
The high volume of trading in inverse equity ETFs is difficult to understand in the middle of a stock market bull run. In the middle of a bull run, it is really difficult for an investor to time a short-term market dip. You have to buy an inverse ETF when the market is in a short-term correction, and sell it before the market recovers, which can be a difficult exercise in market timing. Can sophisticated traders make money during a short-term market dip using automated software programs and technical indicators? Maybe, but it is difficult.
We suspect the high volume of trading in inverse U.S. equity ETFs is attributable to a combination of factors:
U.S. Fixed Income
There are a lot of inverse fixed income ETFs. A lot of the trading of inverse U.S. fixed income ETFs makes sense, or is easier to understand, because traders are making short-term bets on rising U.S. interest rates. Inverse ETFs like DLBS, DTUS, and DTYS and others will go up in value if interest rates start to rise in the United States.
VIX Futures
There are several inverse ETFs related to VIX futures that are heavily traded - see XIV and ZIV. Because VIX futures tend to go up or down in the opposite direction of the U.S. stock market, XIV and ZIV are inverse ETFs that are basically ways to go long the U.S. stock market, but in a highly leveraged, highly volatile way. So the high volume of trading in XIV and ZIV makes sense, although the effective leverage and volatility involved is unbelievable. Read What is the VIX? and Volatility ETFs if you are new to VIX futures.
Commodities
Because commodity prices go up and down such much, there has always been a ton of trading of inverse ETFs that track the price of oil, natural gas, gold and silver. Similarly, there has always been a ton of trading of the stocks of companies that mine for gold and silver, partly because their stocks tend to not be highly correlated with the overall stock market (and they are correlated with the prices of gold and silver).
We don't have the data to prove or dispute this at this time, but some people believe that commodity prices are more "trendy" -- i.e. once they start an upward or downward trend, they are more likely to stay in that trend until some event causes a trend reversal. If true, inverse commodity ETFs should theoretically be easier to short-term trade.
Inverse or short ETFs can have dividends for two reasons. Inverse ETFs use derivative products, including futures contracts and/or swap agreements, to obtain short exposure to indexes or benchmarks. These derivatives generally provide the fund with the desired short exposure to an index or benchmark, but sometimes it does not take all of the fund's cash to purchase the required derivatives. As a result, the fund may have excess cash available to invest in short-term debt securities and/or money market instruments. This generates net investment income that has to be distributed to shareholders.
Alternatively, during the course of buying and selling
futures contracts and/or swap agreements, the fund may generate short-term capital gains, which also have to be distributed to shareholders.
All 40 Act ETFs are required by IRS regulations to distribute substantially all of their net investment income and capital gains to shareholders at least annually.
Here is the list of inverse ETFs that are currently active in our database. Click the "analyze" button if you want to just read more about some of these inverse ETFs.
| Symbol | Description | Leverage factor | Category | Average volume |
|---|---|---|---|---|
| BERZ | MicroSectors FANG & Innovation -3x Inverse Leveraged ETN | -3.00 | Global Equity | 243,612 |
| BIS | UltraShort NASDAQ Biotechnology (2x) ETF | -2.00 | US Equity | 15,922 |
| BNKD | MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN | -3.00 | US Equity | 290,249 |
| BZQ | ProShares UltraShort MSCI Brazil ETF | -2.00 | Global Equity | 44,773 |
| CHAD | Direxion Daily CSI 300 China A Share Bear 1x Shares ETF | -1.00 | Global Equity | 40,422 |
| CLDS | Direxion Daily Cloud Computing Bear 2X Shares ETF | -2.00 | Global Equity | 11,862 |
| DGZ | PowerShares Gold Short ETN | -1.00 | Commodities | 7,635 |
| DOG | ProShares Short Dow30 ETF | -1.00 | US Equity | 1,029,900 |
| DRIP | Direxion Daily S&P Oil & Gas Exploration & Production Bear 3X ETF | -3.00 | US Equity | 3,840,208 |
| DRV | Direxion Real Estate Bear (3x) ETF | -3.00 | US Equity | 593,341 |
| DUG | UltraShort (2x) Oil & Gas ETF | -2.00 | US Equity | 500,654 |
| DUST | Direxion Daily Gold Miner Stocks Bear (2x) ETF | -2.00 | Global Equity | 4,779,058 |
| DWSH | Dorsey Wright Short ETF | -1.00 | US Equity | 63,805 |
| DXD | ProShares UltraShort Dow30 ETF | -2.00 | US Equity | 862,320 |
| DZZ | DB Gold Double Short ETN | -2.00 | Commodities | 12,658 |
| EDZ | Direxion Daily Emerging Market Bear (3x) ETF | -3.00 | Global Equity | 304,048 |
| EEV | UltraShort (2x) MSCI Emerging Markets ETF | -2.00 | Global Equity | 14,295 |
| EFU | UltraShort (2x) MSCI EAFE ETF | -2.00 | Global Equity | 45,147 |
| EFZ | ProShares Short MSCI EAFE ETF | -1.00 | Global Equity | 192,496 |
| EMTY | ProShares Decline of the Retail Store ETF | -1.00 | US Equity | 21,492 |
| EPV | Ultrashort FTSE Europe (2x) ETF | -2.00 | Global Equity | 578,588 |
| ERY | Direxion Energy Sector Bear (2x) ETF | -2.00 | US Equity | 583,932 |
| EUM | ProShares Short MSCI Emerging Markets ETF | -1.00 | Global Equity | 76,744 |
| EUO | UltraShort Euro (2x) ETF | -2.00 | Commodities | 132,007 |
| EWV | ProShares UltraShort MSCI Japan ETF | -2.00 | Global Equity | 17,727 |
| FAZ | Direxion Financial Bear 3x Shares ETF | -3.00 | US Equity | 5,820,102 |
| FNGD | BMO REX MicroSectors FANG+ Index 3X Inverse Leveraged ETN | -3.00 | Global Equity | 2,754,221 |
| FXP | UltraShort (2x) FTSE China 50 ETF | -2.00 | Global Equity | 26,227 |
| GDXD | MicroSectors Gold Miners -3X Inverse Leveraged ETNs | -3.00 | 987,738 | |
| GLL | UltraShort (2x) Gold ETF | -2.00 | Commodities | 91,835 |
| HDGE | Ranger Equity Bear ETF | -1.00 | US Equity | 220,240 |
| HIBS | Direxion Daily S&P 500 High Beta Bear 3X ETF | -3.00 | US Equity | 3,849,328 |
| JDST | Direxion Daily Junior Gold Miners Index (2x) Bear ETF | -2.00 | Global Equity | 5,269,040 |
| KOLD | ProShares UltraShort DJ-UBS Natural Gas ETF | -2.00 | Commodities | 2,881,371 |
| LABD | Direxion Daily S&P Biotech Bear 3X ETF | -3.00 | US Equity | 7,642,273 |
| MJIN | ETFMG 2X Daily Inverse Alternative Harvest ETF | -2.00 | Global Equity | 3,842 |
| MYY | Short MidCap 400 ETF | -1.00 | US Equity | 19,265 |
| MZZ | UltraShort (2x) MidCap400 ETF | -2.00 | US Equity | 6,097 |
| NRGD | MicroSectors U.S. Big Oil Index -3X Inverse Leveraged ETN | -3.00 | US Equity | 452,003 |
| OILD | MicroSectors Oil & Gas Exp. & Prod. -3x Inverse Leveraged ETN | -3.00 | Commodities | 212,618 |
| PSQ | ProShares Short QQQ ETF | -1.00 | US Equity | 32,132,376 |
| PST | ProShares UltraShort 7-10 Year Treasury ETF | -2.00 | US Fixed Income | 70,526 |
| QID | ProShares UltraShort (2x) QQQ ETF | -2.00 | US Equity | 15,694,225 |
| REK | ProShares Short Real Estate ETF | -1.00 | US Equity | 78,347 |
| REW | UltraShort (2x) Technology ETF | -2.00 | US Equity | 59,459 |
| RWM | Short Russell 2000 ETF | -1.00 | US Equity | 3,571,723 |
| RXD | ProShares UltraShort Health Care ETF | -2.00 | US Equity | 4,160 |
| SARK | Tuttle Capital Short Innovation ETF | -1.00 | Global Equity | 2,041,166 |
| SBB | ProShares Short S&P SmallCap 600 ETF | -1.00 | US Equity | 67,626 |
| SCC | ProShares UltraShort Consumer Services ETF | -2.00 | US Equity | 5,113 |
| SCO | UltraShort (2x) DJ-UBS Crude Oil ETF | -2.00 | Commodities | 1,915,028 |
| SDD | UltraShort (2x) SmallCap 600 ETF | -2.00 | US Equity | 5,926 |
| SDOW | UltraPro Short Dow30 (3x) ETF | -3.00 | US Equity | 14,451,345 |
| SDP | ProShares UltraShort Utilities ETF | -2.00 | US Equity | 16,374 |
| SDS | UltraShort (2x) S&P 500 ETF | -2.00 | US Equity | 9,059,013 |
| SEF | ProShares Short Financials ETF | -1.00 | US Equity | 170,630 |
| SH | ProShares Short S&P 500 ETF | -1.00 | US Equity | 36,657,871 |
| SIJ | ProShares UltraShort Industrials ETF | -2.00 | US Equity | 31,319 |
| SINV | ETFMG Prime 2X Daily Inverse Junior Silver Miners ETF | -2.00 | Global Equity | 34,720 |
| SJB | ProShares Short High Yield ETF | -1.00 | US Fixed Income | 868,334 |
| SKF | UltraShort (2x) Financials ETF | -2.00 | US Equity | 126,373 |
| SMDD | UltraPro Short MidCap 400 (3x) ETF | -3.00 | US Equity | 26,188 |
| SMN | UltraShort (2x) Basic Materials ETF | -2.00 | US Equity | 27,382 |
| SOGU | The Short De-SPAC ETF | -1.00 | US Equity | 2,644 |
| SOXS | Direxion Daily Semiconductor Bear (3x) ETF | -3.00 | US Equity | 47,383,927 |
| SPDN | Direxion Daily S&P 500 Bear 1x Shares ETF | -1.00 | US Equity | 5,845,061 |
| SPXS | Direxion Daily Large Cap Bear (3x) ETF | -3.00 | US Equity | 33,980,262 |
| SPXU | ProShares UltraPro Short S&P500 ETF | -2.00 | US Equity | 32,824,199 |
| SQQQ | ProShares UltraPro Short QQQ (3x) ETF | -3.00 | US Equity | 101,902,900 |
| SRS | UltraShort (2x) Real Estate ETF | -2.00 | US Equity | 171,200 |
| SRTY | UltraPro Short Russell 2000 (3x) ETF | -3.00 | US Equity | 1,248,358 |
| SSG | UltraShort (2x) Semiconductors ETF | -2.00 | US Equity | 61,000 |
| SVXY | ProShares Short VIX Short-Term Futures ETF | -1.00 | Alternatives | 3,543,116 |
| SZK | ProShares UltraShort Consumer Goods ETF | -2.00 | US Equity | 3,260 |
| TBF | Short 20+Year Treasury ETF | -1.00 | US Fixed Income | 2,193,702 |
| TBT | ProShares UltraShort 20+ Year Treasury (2x) ETF | -2.00 | US Fixed Income | 5,190,553 |
| TBX | ProShares Short 7-10 Year Treasury ETF | -1.00 | US Fixed Income | 134,732 |
| TECS | Direxion Daily Technology Sector Short (3x) ETF | -3.00 | US Equity | 2,178,049 |
| TMV | Direxion Daily 20+ Year Treasury Bear 3X ETF | -3.00 | US Fixed Income | 456,382 |
| TTT | UltraPro Short 20+ Year Treasury (3x) ETF | -3.00 | US Fixed Income | 90,844 |
| TWM | UltraShort (2x) Russell 2000 ETF | -2.00 | US Equity | 3,089,254 |
| TYO | Direxion Daily 10-Yr Treasury Bear 3x Shrs ETF | -3.00 | US Fixed Income | 147,634 |
| TZA | Direxion Daily Small Cap Bear (3x) ETF | -3.00 | US Equity | 13,764,746 |
| UDN | PowersShares DB US Dollar Index Bearish ETF | -1.00 | Commodities | 203,685 |
| WEBS | Direxion Daily Dow Jones Internet Bear 3X ETF | -3.00 | US Equity | 593,834 |
| YANG | Direxion China Bear (3x) ETF | -3.00 | Global Equity | 5,430,055 |
| YCS | ProShares UltraShort Yen ETF | -2.00 | Commodities | 38,759 |
| YXI | Short FTSE China 50 ETF | -1.00 | Global Equity | 53,491 |
| ZSL | UltraShort (2x) Silver ETF | -2.00 | Commodities | 276,227 |
All data is a live query from our database. The wording was last updated: 01/19/2018.
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