The pandemic has introduced a new wave of investors. Some are in it for the thrills, some for the long haul, while others want to trade tactically. The latter are in luck as traders now have more tools than ever before. Hence, these market participants can express conviction not just during bull runs, but also during market downfalls – all without having to deal with a margin account.
What is short selling?
If the price falls indeed, the trader can buy back at a lower price, return the borrowed shares to the broker, and pocket the difference as profit.
RequirementsTraditional short selling can only be done via a margin account.
Additionally, the investors must abide by the brokers’ equity requirements to maintain their short position open. Other alternatives like using options, futures, and structured products come with their fair share of risks and complexities.
Going Short Using ETPs
The advent of exchange-traded products has allowed investors to go short by being long (pun intended). By purchasing inverse ETPs, investors can get short exposures to a wide array of securities. These include single stocks, broad market ETFs, sectors, and even thematic ETFs.
How do they work?
Inverse ETPs aim to offer daily inverse exposure – hence, if a particular instrument falls by 1% on a certain day, the inverse tracker is expected to gain on that day. The exact amount will depend on the leverage factor and fees involved.
What are some key differences between inverse ETPs and short selling?
Inverse ETPs are rebalanced on a daily basis. This means the inverse exposure is provided for that particular day. Holding for longer periods may lead to compounding – something that can benefit investors in trending markets and hurt them in choppy ones.
The main advantage of inverse ETPs is they allow investors to quickly and easily benefit from falling asset prices. Assuming an investor pays for the position outright (no leverage), their loss is also capped at the amount invested, since the price of the ETF can’t drop below zero.
Due to daily rebalancing, holding periods longer than 1 day and higher leverage factors can lead to a divergence of ETP performance vs what an uninformed investor might expect. Please read the full risk disclosure in Leverage Shares’ Prospectus.
Inverse ETP Quirks
I. With short selling, your max profit is 100%. With inverse ETPs, continued declines in the underlying instrument can lead to inverse ETP performance of >100%.
II. During choppy markets, inverse ETPs may not perform as expected. The below scenario shows that although the underlying instrument lost 5% over a 10-day period, so did the Inverse ETP.
How can I buy inverse ETPs?
You can check out the full range of short and leveraged ETPs by Leverage Shares.
These can be traded like any other stock or ETF via a normal brokerage account.
Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.
Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.
Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.
Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.
Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.
For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.
Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.
Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.
Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.
Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.
He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.
Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.
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The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.
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Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.
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