It’s been awhile since I’ve published a revised list of the most liquid 3x leveraged etf shorts. These are inverse ETFs that allow you to short a particular segment of the market without having to borrow shares from a broker. Both Direxion and ProShares now offer these highly leveraged ETFs with ProShares launching their S&P500 short ETF a few days ago.
Here’s the list in order of most liquid:
Financial Bear (FAZ) 268 million shares
Large Cap Bear (BGZ) 10 million shares
Small Cap Bear (TZA) 10 million shares
Energy Bear (ERY) 2 million shares
Emerging Markets Bear (EDZ) 564K shares
Technology Bear (TYP) 312K shares
UltraPro Short S&P500 3x Short (SPXU) 96K shares
30 Yr Treasury Bear (TMV) 66K shares
Mid Cap Bear (MWN) 38K shares
Developed Markets Bear (DPK) 20K shares
10 Yr Treasury Bear (TYO) 6K shares
There has been much concern of late that the rising rates machine is in motion and the Fed is out of bullets to do much about it. The Fed has done itâ€™s best to keep rates artificially low with 100 of billions in treasury purchases, but itâ€™s becoming clear it isnâ€™t working as yields continue to rise. That spells trouble for the housing market and the overall economy. I donâ€™t think there is any question that a trend up in rates across the board will be a major theme in the coming years.
There are a few ways to profit from this trend. One of course is to buy gold, while the other is to short treasuries. The ProShares UltraShort 20 Yr Treasury ETF (TBT) has performed extremely well in this environment and if you want more bang for your buck, leveraged ETF extraordinaire Direxion Funds recently launched the Direxion Daily 10-Year Treasury 3x Shares (TYO) and the Direxion Daily 30-Year Treasury Bear 3x Shares (TMV) ETFs.
Iâ€™d stay away from the 10 Yr ETF since it only trades 3k shares a day right now, but the 30 yr ETF is increasingly liquid and trades on average over 50K shares a day.
The chart reveals a healthy pull back late last week after a fairly strong 7 year auction alleviated fears of oversupply, but those fears returned a bit today. If TMV pulls back to the upward trend line in the coming days, I may jump in for a trade.