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

On May 3, I said, “Now could be the time to jump on this volatile double-inverse fund. If the S&P 500 falls under 1,175, and then 1,150, SDS could make a quick run to $36-$38.”

The S&P fell and our trade was made. Now, with the S&P rebounding following a massive breakdown, SDS could once again be a good substitute for a short-sale.

But be careful since the market is rebounding. Buy only on a strong day that could quickly reverse, and then benefit from a continuation of the bear market.

This leveraged ETF carries more risk than an ordinary ETF, so investors should use stop-loss orders. And the SEC has determined that “ultra” funds are not good long-term investments, and that they are most appropriate for short-term trades.

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.

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