ETF inverse funds have some great opportunity right now. A number of ETFs are now offering high risk "inverse" funds that can play bull or bear moves in the general market by investing in 2X or 3X bull or bear moves.
This is a form of hedge fund trading, and can be utilized for long term investing, as a hedge (ex: hold a bear fund while investing to the upside), OR for a good swing trader can offer some tremendous opportunity for 5% to 10% returns, when traded like a swing trade.
Let's use two of my favorite trades. BGU and BGZ. Dirextion DailyLarge Cap Bear and Bull 3X funds, medium volume, priced well in the $30.00 range (leaving out the baby boy traders), and quite easy to play to 5 and 10% returns quickly.
Here's simple logic. Use our longer term Dow projections and at the bottom projection to the Dow buy a position to BGU, the 3x Bull Large Cap. Sell it for up to 10% profits as the Dow moves to our top projections. Near the top, begin the buy on the inverse, BGZ, and repeat the sale at the bottom.
How often will this not work out? On estimates 25% of the time and when this occurs the trader is creating a “natural hedge” to bi-lateral positions, as the market begins establishing a bias, diminish the holding in one of the hedges.
The trader wins two ways:
- Swing trading puts or calls managed in group, on large caps.
- Gaining large cap exposure, short and long, for a portfolio.
