New Trade for February 4th, 2022

Stocks were mixed to start the day as the market processed corporate earnings from major names.  Meta Platforms (FB) plunged more than 27% after reporting weak quarterly results yesterday, weighing heavily on markets.  The Nasdaq saw its worst day since September 2020 yesterday, sinking 3.7%.  The S&P 500 and the Dow dropped 2.4% and 1.5%, respectively.  

“The sharp drop in FB market cap today and the accompanying drag on the S&P 500 is a stark reminder of the high concentration of mega-cap Tech stocks in the S&P 500 – and the vulnerabilities that such concentration brings,” Goldman Sachs’ Chris Hussey said in a note.  

Before the bell on Friday, the Nasdaq was up 0.5% on the week, while the S&P 500 and the Dow had each gained around 1%.  It’s anyone’s guess where we’ll close the week.  The major indices are all down for the year, with tech shares suffering the most.  The technology-heavy Nasdaq composite is down more than 12% in 2022.

Bearish investors may want to go near-term short on the Nasdaq- 100 Index, given the sluggish backdrop for high-priced tech stocks.  Today we’ll highlight the method that many of the pros on Wall Street use for doing just that.  However, you don’t need to be a professional to employ this tactic.  

The ProShares Short QQQ (PSQ) fund offers inverse exposure to an index comprised of the 100 largest nonfinancial securities on the NASDAQ, making it a potentially attractive option for investors looking to bet against this sector of the U.S. economy.  

It’s important to note that PSQ is designed to deliver inverse results over a single trading session, with exposure resetting every month.  Investors considering this ETF should understand how that nuance impacts the risk/return profile and realize the potential for “return erosion” in volatile markets.  PSQ should definitely not be found in a long-term, buy-and-hold portfolio but may be a useful tool for more active investors looking to either hedge existing exposure or bet on a decline in the top nonfinancial NASDAQ securities.

ProShares Short QQQ (PSQ) Data Summary

  • Net Assets   478.22M
  • Expense Ratio  0.95%
  • Average Daily Volume $60.72M

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