Coronavirus fears are prompting traders and investors alike to seek refuge in this volatile market. Some of the biggest beneficiaries amid this latest sell-off have been inverse ETFs, funds designed to profit from the decline in the stock market.
The FANG group in particular has been the center of attention lately seeing as how it was one of the biggest contributors to the market-wide rally prior to the pullback; not surprisingly, savvy traders have been looking to exploit weakness in this high-beta group of names as coronavirus fears have escalated. To put this performance divergence into perspective, consider the following chart:
Q4 2019 hedge fund letters, conferences and more
The problem: Traditional benchmark indices like the Nasdaq-100 Index (related Short ETF: SQQQ) and Technology Select Sector Index (related Short ETF: TECS) provide limited exposure to FAANG stocks, notes REX Shares
SQQQ and TECS's Exposure To FAANG Stocks
“Traditional benchmark indices like the Nasdaq-100 Index (related Short ETF: SQQQ) and Technology Select Sector Index (related Short ETF: TECS) provide limited exposure to FAANG stocks. Unlike the traditional benchmark indices, the NYSE FANG+ Index offers an investment solution for direct FAANG exposure. Prior to the launch of FNGD, the opportunity to access inverse daily resetting leverage on FAANG stocks was limited.
Now, with FNGD, investors can access inverse daily resetting leverage on some of the most innovative names in technology and tech-enabled companies,” said Scott Acheychek, President of REX Shares. “Despite a strong tech-led rally to start 2020, we’ve seen a considerable pullback in the equity markets. Investors, seeking a hedge against the recent volatility, have turned to the short -3X FANG ETN (FNGD). The increase in demand for FNGD has led to another upsizing event – marking the sixth time our partners at BMO have increased the number of notes outstanding since launch.”