New Trade for March 10th, 2022

Stocks ticked lower amid adverse developments in the Russia-Ukraine conflict.  Failed negotiations between the two sides were cause for concern this morning, raising the question of how and when peace can be found.    

The move lower this morning came after the major indices logged impressive gains in the previous session.  The Dow closed 2% higher yesterday, the S&P 500 climbed 2.6%, and the Nasdaq stacked on 3.6% for its best day since November.    

“It is somewhat typical of a high volatility environment where you can get just wicked swings in both directions,” said Charles Schwab chief investment strategist Ann Sonders.  “A relief rally is probably the best way to describe what happened in the markets.  …It doesn’t surprise me to see a very sharp countertrend move.”  

Tech stocks have swung drastically lately, evidenced by the Nasdaq’s more than 3% move in both directions over the past three days.  The benchmark entered a bear market earlier this week, down more than 20% from its November high, and has since recovered slightly but remains a stone’s throw away from bear market territory.

Bearish investors may want to go near-term short on the Nasdaq- 100 Index, given the sluggish backdrop for 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 on a monthly basis.  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

Should you invest in PSQ right now?

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