SPDN: An Inexpensive Way To Profit When The S&P 500 Falls

Seeking Alpha2022-10-25

SummarySPDN is not the largest or oldest way to short the S&P 500, but it's a solid choice.This ETF uses a variety of financial instruments to target a return opposite that of the S&P 500 Index.SPDN's...

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alod
2022-10-26
alod
Yes ok
andrew123
2022-10-26
andrew123
Like
tigernaut
2022-10-26
tigernaut
👍
- Ytyt:
  ok
Bspn
2022-10-26
Bspn
K
phantom74
2022-10-26
phantom74
liks
JQ62
2022-10-26
JQ62
Like
- ToTheM00N:
  Ok
- XYSAYSYO:
  Hihi

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Many investors assume the only way to navigate a potentially long-term bear market is to hide in cash, day-trade or \"just hang in there\" while thebear takes their retirement nest egg.The Direxion Daily S&P 500® Bear 1X ETF (NYSEARCA:SPDN) is one of a class of single-inverse ETFs that allow investors to profit from down moves in the stock market.SPDN is an unleveraged, liquid, low-cost way to either try to hedge an equity portfolio, profit from a decline in the S&P 500, or both. We rate it a Strong Buy, given our concern about the intermediate-term outlook for the global equity market.StrategySPDN keeps it simple. If the S&P 500 goes up by X%, it should go down by X%. The opposite is also expected.Proprietary ETF GradesOffense/Defense: DefenseSegment: Inverse EquitySub-Segment: Inverse S&P 500Correlation (vs. S&P 500): Very High (inverse)Expected Volatility (vs. S&P 500): Similar (but opposite)Holding AnalysisSPDN does not rely on shorting individual stocks in the S&P 500. Instead, the managers typically use a combination of futures, swaps and other derivative instruments to create a portfolio that consistently aims to deliver the opposite of what the S&P 500 does.StrengthsSPDN is a fairly \"no-frills\" way to do what many investors probably wished they could do during the first 9 months of 2022 and in past bear markets: find something that goes up when the \"market\" goes down. After all, bonds are not the answer they used to be, commodities like gold have, shall we say, lost their luster. And moving to cash creates the issue of making two correct timing decisions, when to get in and when to get out. SPDN and its single-inverse ETF brethren offer a liquid tool to use in a variety of ways, depending on what a particular investor wants to achieve.WeaknessesThe weakness of any inverse ETF is that it does the opposite of what the market does, when the market goes up. So, even in bear markets when the broader market trend is down, sharp bear market rallies (or any rallies for that matter) in the S&P 500 will cause SPDN to drop as much as the market goes up.OpportunitiesWhile inverse ETFs have a reputation in some circles as nothing more than day-trading vehicles, our own experience with them is, pardon the pun, exactly the opposite! We encourage investors to try to better-understand single inverse ETFs like SPDN. While traders tend to gravitate to leveraged inverse ETFs (which actually are day-trading tools), we believe that in an extended bear market, SPDN and its ilk could be a game-saver for many portfolios.ThreatsSPDN and most other single inverse ETFs are vulnerable to a sustained rise in the price of the index it aims to deliver the inverse of. But that threat of loss in a rising market means that when an investor considers SPDN, they should also have a game plan for how and when they will deploy this unique portfolio weapon.Proprietary Technical RatingsShort-Term Rating (next 3 months): Strong BuyLong-Term Rating (next 12 months): BuyConclusionsETF Quality OpinionSPDN does what it aims to do, and has done so for over 6 years now. For a while, it was largely-ignored, given the existence of a similar ETF that has been around much longer. But the more tenured SPDN has become, the more attractive it looks as an alternative.ETF Investment OpinionSPDN is rated Strong Buy because the S&P 500 continues to look as vulnerable to further decline. And, while the market bottomed in mid-June, rallied, then waffled since that time, our proprietary macro market indicators all point to much greater risk of a major decline from this level than a fast return to bull market glory. Thus, SPDN is at best a way to exploit and attack the bear, and at worst a hedge on an otherwise equity-laden portfolio.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9988878939,"gmtCreate":1666740002221,"gmtModify":1676537796871,"author":{"id":"3581595172436790","authorId":"3581595172436790","name":"alod","avatar":"https://static.tigerbbs.com/dfd3f29585ed00df555c839652af67bf","vip":1,"hat":"https://static.tigerbbs.com/0a8758340a08196056f8bc1e54805193","crmLevel":7,"crmLevelSwitch":0,"idStr":"3581595172436790","authorIdStr":"3581595172436790"},"htmlText":"Yes ok","listText":"Yes ok","text":"Yes 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