How to Trade a Short ETF
Do you want to make money by trading a short ETF? Short ETFs aren't like stocks in that you can go long and still be short. Keep reading to find out about trading a short ETF
Other People Are Reading
Instructions
-
-
1
Find a list of short ETFs. Sometimes, these are referred to as inverse ETFs. Do an internet search on "inverse ETFs" to find a list of short ETFs. Such ETFs can be short on the Dow, on commodities like oil, on economic sectors such as housing, or on currencies.
-
2
Write the ticker symbols for the ETFs you might be interested in trading. Remember, these are short ETFs that will go up in value as long as the underlying commodity goes down in price. The ticker symbols are three letter symbols. For example, "DXD" is a short ETF ticker symbol.
-
-
3
Choose your level of leverage. A short ETF can be 1x, 2x, 2.5x or even 3x. The "x" stands for times leverage. For example, if you are short oil with a 2x ETF and the price of oil goes down 3% in price, your ETF should go up about 6% in value. However, this will almost never be exactly double because ETFs aren't usually perfect instruments and there are overhead costs to running an ETF.
-
4
If your leverage is more than 1x, then look out for "equity traps" where a short ETF can slowly lose value even though the underlying commodity is staying around the same value.
-
5
Get your stock trading account and place an order. The short ETF should be fairly easy to purchase and sell, as long as it has a decent minimum volume. If the ETF is only trading 50,000 shared or less a day, you may have difficulty buying at fair market value, so try to find a short ETF that has a large daily average volume.
-
6
Don't hold on too long to a loser, and don't hold on too long to a winner either. Set your target goals and prices and stick to them.
-
1
