ProShares UltraPro Short QQQ
ProShares UltraPro Short QQQ (the Fund) seeks daily investment results, which corresponds to three times the inverse of the daily performance of the NASDAQ-100 Index (the Index). The Index includes 100 of the non-financial domestic and international issues listed on National Association of Securities Dealers Automated Quotation (NASDAQ) Stock Market. The Fund invests in derivatives. It also invests in short-term cash instruments, which have a remaining maturity of 397 days or less and exhibit high quality credit profiles. The Fund's advisor is ProShare Advisors.
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What is SQQQ?
A bear market has its opportunities. If betting against the Nasdaq sounds interesting, read on.
SQQQ is a leveraged inverse Exchange Traded Fund (ETF) also known as a short ETF. Designed by Proshares, SQQQ returns three times the opposite (-3x) of the Nasdaq-100’s performance on any given trading day before fees and expenses.
As with any leveraged ETF, SQQQ uses financial derivatives such as options and futures to multiply returns and losses. SQQQ’s performance is based on the Nasdaq-100’s performance on any given day, except inversely.
What is a short ETF?
A short ETF is a product that performs in the opposite way to the underlying index it is tracking.
For example, if the underlying index decreases by 2%, the 3x leveraged inverse ETF will result in a gain of 6%. If the underlying index increases 2% in one day, the 3x leveraged inverse ETF will lose 6%.
A short ETF can be bought or sold on an exchange just like any stock.
How do traders use SQQQ?
SQQQ’s underlying index is the Nasdaq-100.
This index contains, based on market cap, 100 of the largest domestic and international non-financial companies. Over 50% are in technology. Almost 20% are telecommunications stocks. And a sizable portion of the index is made of consumer discretionary and health care companies.
As SQQQ is an inverse ETF, intraday traders will invest when they expect the greater non-financial market, in particular Nasdaq-100 companies, to encounter difficulty.
Should I buy SQQQ?
In most cases, SQQQ ETF is used by financial advisers and professional investors. They thoroughly understand the inverse nature of short ETFs. More importantly, they understand both gains and losses are multiplied due to leverage.
SQQQ was not designed to be a passive, long-term investment. It was designed by ProShares as a short-term trading vehicle for high-reward gains. Because of this, SQQQ can pose high risks.
SQQQ is meant to be bought and sold intraday. As per ProShares’ SQQQ fact sheet:
“Due to the compounding of daily returns, holding periods of greater than one
day can result in returns that are significantly different than the target return and
ProShares' returns over periods other than one day will likely differ in amount and
possibly direction from the target return for the same period. These effects may be
more pronounced in funds with larger or inverse multiples and in funds with
volatile benchmarks. Investors should monitor their holdings as frequently as daily.”
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This does not constitute financial advice. You should do your own research before making an investment decision. Past performance is not a reliable indication of future performance. No representation is made as to the timeliness, reliability, accuracy or completeness of the market data provided.