New Single Stock Leveraged ETFs Offer Investors a New Way to Short Individual Stocks
Not only do you have to identify the right company, you often must have great timing.
Even if one can identify a stock going down, one must still decide how to place their bet. Do they sell shares short? Do they buy options? If they buy options, what strike price and expiration should they choose? The answers to these questions are usually beyond the understanding of the average retail investor.
Fortunately, there is now a relatively simple way to short stocks: single-stock leveraged ETFs. As their name suggests, these ETFs focus on a single stock. They use a variety of financial instruments, including short selling and options, to bet on (or against) stocks. The fact that they are leveraged means they will experience larger gains and greater losses than the security they’re tracking. While these types of ETFs have been available on foreign exchanges for some time, they are only recently making their way to the U.S.
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Investment firm AXS Investments has rolled out 8 of a planned 18 ETFs aimed at shorting some of the largest and most actively traded companies on the market, including Tesla, Nvidia and Pfizer. The company intends for these ETFs to be actively traded, not bought and held.
The firm’s CEO, Greg Bassuk, commented:
Anyone considering one of these ETFs must accept a large amount of risk, given their leveraged nature. However, if the right company is chosen and there is a move to the downside over a trading day, these ETFs should provide outsized returns.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks mentioned in this article.
