ProShares Short S&P500 (ETF) (SH), ProShares Short QQQ (ETF) (PSQ), ProShares UltraShort S&P500 (ETF) (SDS): Investors May Want to Hedge Against a Fractured Fed

The ProShares UltraShort S&P500 (ETF) (NYSEARCA:SDS), looks to inversely track the daily performance of the S&P 500 by a factor of two. In other words, if the S&P falls 5%, the ProShares UltraShort S&P500 (ETF) (NYSEARCA:SDS) hopes to gain 10%. It is a leveraged ETF that uses derivatives in an attempt to achieve the doubling of performance.

Though holding the ProShares UltraShort S&P500 (ETF) (NYSEARCA:SDS) might appear attractive thanks to its increased portfolio protection, it is too risky for most investors.

In conclusion

The evidence suggests that the Federal Reserve does not have a plan for exiting its current monetary program, and the seeming lack of consensus among members increases the risk of a disorderly drawdown. The markets have clearly shown a dislike of this uncertainty, and continued volatility is likely. Investors might want to consider holding some portfolio insurance to buffer any resulting future market downturns.

The article Investors May Want to Hedge Against a Fractured Fed originally appeared on Fool.com and is written by Bob Chandler.

Bob Chandler has a long position in the ProShares Short S&P 500. The Motley Fool has no position in any of the stocks mentioned.

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