Looking for a little advice on just what the options are for shorting this market. My account is cash only and I don't have the option and don't really want to directly short stocks. So I had a look around at some stuff and found the inverse ETN's ... I had a bit of a punt on the TVIX and did ok but it's kind of scary given the fact that it's actually not that well correlated all the time. The contango and decay are also worrying. It's just not a very nice option in my opinion. The fact it is an ETN and not an ETF is also a problem for me. My understanding is that Credit Suisse can just change the rules and poof money lost, apparently this is something that has been done before. The general advice seems to be to use it to hedge and not hold it for too long. That's fine, but I would like to look at the longer term (days to weeks). I have looked at options but have no real experience other than using them to hedge. Not really my bag. I remain bearish at the moment and am 100% cash so am looking around for ideas.
You can hold inverse ETNs for the long term, just not the ones that are inverse and leveraged. There are a few inverse ETFs that do short actual stocks, not just hold futures. Check out AdvisoryShares DWSH and HDGE.
Thanks DaveV, I am already looking at SH which seems to be similar to the two above. Anything that is holding futures seems to be classified as an ETN not an ETF, would I be correct in saying that ?
As far as I know ETNs are backed up by the credit worthiness of the sponsoring institution, not by holding actual shares. It can be risky to hold ETNs long term. Its been 10 years since Lehman went bankrupt, and investors owning Lehman ETNs are still trying to get their money back.
https://www.stocktrader.com/inverse-short-etfs-bearish-etf-funds/ You can easily short any market index you choose. Just pick the corresponding inverse ETF.
The majority of inverse ETFs and ETNs provide an inverse of the daily percentage return of the market. This is a very different return from holding a fixed number of short SPY shares, for example if you hold the product for anything more than a day. The market could go down 10% over the course of a month and you could end up down 1%, up 5%, or up 15%. It's almost vanishingly unlikely that the ETF would be up 10% though, despite the fact that you might expect that from the name. Do the math in an Excel spreadsheet on how daily returns work, you may find it enlightening.