Editor’s Note: SDS went ex-capital gain distribution with $11.46188 and a dividend distribution of $0.028553 today, thus the sharp drop in the price of SDS.

For holders of SDS, the current price must be adjusted by these payouts. In other words, SDS, at the current price of $75.15, is adjusted for $11.490433 = $86.64.

This is a standard event, but the amounts were much larger than most investors anticipated.

UltraShort S&P 500 ProShares (SDS) — This Exchange-Traded Fund (ETF) seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the S&P 500 Index (SPX). The fund normally invests 80% of assets in financial instruments with economic characteristics that should be inverse to those of the index.

The Trade of the Day has regularly reviewed the SDS, pointing to the number of buying opportunities over the course of the bear market.

Now, with the possibility of a test of the market’s lows, SDS may be an effective way to cushion against portfolio losses and provide for traders a quick profit with a run above $100.

Note that the support at $78-$79 appears to have held and that the stochastic has issued a buy signal.

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Sam Collins is a registered, fee-based portfolio manager who may be contacted samailc@cox.net. You can also check out an archive of some of his most recent market outlooks by clicking here.