New Trade for June 13th, 2025

A Simple Way to Profit When Markets Fall

When markets slide, many traders instinctively turn to short-selling — borrowing shares to sell high and buy back lower. But traditional short-selling comes with major risks. While your potential profit is capped (a stock can only fall to zero), your losses are theoretically unlimited if the trade moves against you. Worse, a short position can trigger margin calls, forcing you to close out at the worst possible time.

That’s why more and more traders are turning to inverse ETFs — funds specifically designed to move in the opposite direction of a given index or sector. These ETFs can be used to hedge existing positions or to profit directly from downside moves. They’re especially attractive in volatile markets where swift declines can create quick, tactical opportunities.

Over short timeframes — particularly single-day trades — inverse ETFs typically deliver a close inverse correlation to their target index. But they aren’t ideal for long-term holding. Due to daily resets and compounding effects, the performance of inverse ETFs can diverge from the underlying index over time, especially in choppy markets. Most also come with higher-than-average expense ratios, often 1% or more, which can eat into returns with frequent use.

Today’s Focus: ProShares Short S&P 500 (SH)

With over $1.3 billion in assets, the ProShares Short S&P 500 (NYSEARCA: SH) is the largest inverse ETF by value. It aims to deliver the inverse daily performance of the S&P 500 — making it a straightforward way to hedge or profit when large-cap U.S. stocks are under pressure.

SH is designed for short-term tactical use and should not be treated as a long-term investment. Its daily reset mechanism means it’s best suited for day traders, swing traders, or investors looking to temporarily reduce downside exposure. While it’s a powerful tool, it also comes with an expense ratio of 0.89% and the potential for performance erosion in sideways or highly volatile conditions.

Bottom Line

If you’re concerned about continued market weakness, SH offers a simple, liquid way to take a bearish stance on the broader market — without the risks and complexity of traditional short-selling. Just remember: it’s a tool, not a long-term solution.

Stay tactical, stay informed — and always use the right tool for the job.



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