The complex world of leveraged and inverse ETFs

If you think these risky bearish bets have 1000% upside, think again – most individual investors lack the skills to perfectly time these products, and should avoid them altogether

Yan Barcelo 19 December, 2019 | 1:15AM
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In this land of the 10-year bull market lives a Canadian investor who believes he can turn his $6,000 bet into something like $300,000. He believes he’s found products (leveraged and inverse exchange-traded funds) that will not only protect his portfolio but also allow him to strike big when things turn ugly. Spoiler: we don’t think it’s very likely. His market outlook is not unfounded, but these products are not made to deliver anything like the Big Short.

About 18 months ago, individual investor Jeremy Kher injected about 5% of his portfolio into Horizons’ BetaPro S&P 500 VIX Short-Term Futures ETF (HUV) at around $6 a unit. Since then, HUV has declined to approximately $3, causing his position to register a 50% loss. “I don’t care,” he shoots, “and I even plan to buy more of it. I also plan to diversify into other ETFs, like HSD (BetaPro S&P 500 -2x Daily Bear ETF) and HIX (BetaPro S&P/TSX 60 Daily Inverse ETF). Instead of putting money in cigarettes, I have this ETF. It’s money in the bank for very bad days ahead.”

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BetaPro S&P 500 VIX ST Futures ETF11.59 CAD-0.52
BetaPro S&P 500® -2x Daily Bear ETF7.39 CAD0.41
BetaPro S&P 500® 2x Daily Bull ETF18.75 CAD-0.05
BetaPro S&P/TSX 60 Daily Inverse ETF7.59 CAD0.13

About Author

Yan Barcelo  is a veteran financial and economic journalist with more than 30 years of experience, writing for many publications in Toronto and in Montreal, including CPA MagazineLes Affaires and Commerce.

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