🛡️ Hedging Strategy
Inverse (reverse), short-volatility hedges and safe-haven ETFs used to hedge long equity exposure during corrections, bear markets, or risk-off regimes. Inverse ETFs rise when the underlying index falls. Leveraged (-2x / -3x) products reset daily and decay over time — use only for short-duration tactical hedges, not buy-and-hold.
Available Hedging ETFs
Click any ETF for full details — expense ratio, AUM, NAV, top holdings, sector allocation, multi-timeframe price chart and recent news.
| Ticker | Role | Asset Class | Hold For | Price | ER % | YTD | When to use it |
|---|---|---|---|---|---|---|---|
| SH | Inverse S&P 500 (-1x) | Equity Inverse | Days–Weeks | — | — | — | Broad-market hedge when VIX < 25 and you expect a 5–10% pullback. No daily compounding decay vs -3x cousins, so tolerable to hold up to ~1 month. |
| PSQ | Inverse Nasdaq-100 (-1x) | Equity Inverse | Days–Weeks | — | — | — | Use when megacap-tech leadership cracks (semis rolling over, MSFT/NVDA below 50DMA). Pair with long defensives (XLP/XLU). |
| DOG | Inverse Dow 30 (-1x) | Equity Inverse | Days–Weeks | — | — | — | Hedge concentrated industrial/financial exposure when DJIA breaks below the 100DMA. Lower beta than SH; complements value portfolios. |
| RWM | Inverse Russell 2000 (-1x) | Equity Inverse | Days–Weeks | — | — | — | Best during credit-spread widening or rate-shock episodes — small caps lead drawdowns. Buy when IWM loses 200DMA on rising HY OAS. |
| SDS | Inverse S&P 500 (-2x) | Equity Inverse | Days only | — | — | — | Tactical hedge into a known catalyst (FOMC, CPI, earnings week). Decay is real beyond 5 days — set a hard exit. |
| QID | Inverse Nasdaq-100 (-2x) | Equity Inverse | Days only | — | — | — | Short-burst hedge for tech-heavy books around earnings or after a parabolic QQQ extension > 2 ATR above 20DMA. |
| SPXU | Inverse S&P 500 (-3x) | Equity Inverse | Intraday–2 days | — | — | — | Only for confirmed breakdown days (SPY < 20DMA on heavy volume + VIX > 22). Cut losses fast; compounding burns ~3–5% per choppy week. |
| SQQQ | Inverse Nasdaq-100 (-3x) | Equity Inverse | Intraday–2 days | — | — | — | Day-trade vehicle for confirmed tech selloffs. NEVER swing-hold — has lost > 99% since inception due to compounding. |
| TZA | Inverse Russell 2000 (-3x) | Equity Inverse | Intraday–2 days | — | — | — | Highest-beta hedge; reserve for credit-event days (HY spreads +50bps, regional bank stress). Position size ≤ 2% of book. |
| SOXS | Inverse Semis (-3x) | Equity Inverse | Intraday–2 days | — | — | — | Tactical only when SOXX/SMH breaks 50DMA with NVDA/AVGO confirming. AI-cycle reversals can squeeze hard — strict stops. |
| VIXY | Long VIX Short-Term Futures | Volatility | Days | — | — | — | Buy when VIX < 14 and term structure is in steep contango (cheap insurance). Roll cost ~5–10%/month — exit on first spike. |
| UVXY | Long VIX (1.5x) | Volatility | Days | — | — | — | Bigger payoff than VIXY in a vol shock but bigger contango bleed. Use only when VIX9D < VIX < VIX3M (term-structure tailwind). |
| TLT | 20+ Year Treasuries | Long-Duration Bonds | Weeks–Months | — | — | — | Classic risk-off hedge when Fed pivot is in play (10Y yield rolling over from > 4.5%). Loses if inflation surprises higher; check CPI prints. |
| GLD | Physical Gold | Precious Metals | Months | — | — | — | Structural hedge for real-rate down moves, USD weakness, geopolitical stress. Allocate 5–10% strategically; add on dips to 50DMA. |
Sector view: Inverse equity ETFs target broad indices (S&P/Nasdaq/Russell/Dow) or sector baskets (SOXS = semis). Volatility ETFs (VIXY/UVXY) profit from VIX spikes but bleed in calm markets. TLT and GLD are strategic hedges — different mechanism, hold for weeks–months.
⚠️ Important: Daily Rebalancing & Compounding Risk
These instruments are strictly designed for short-term tactical trading. Because they rebalance their exposure daily, mathematical compounding causes tracking errors over longer periods. Holding an inverse ETF for months during a choppy, sideways market will cause the fund to lose value even if the index finishes flat.
How to use these instruments together
- Sizing: Typical hedge allocation is 5–15% of portfolio. Large enough to soften drawdowns, small enough that you don't bleed it dry in bull markets.
- Instrument hierarchy: Futures (best for >$25k books, persistent hedge) → Puts (best for defined-loss event hedging) → Inverse ETFs (only when futures/options aren't available, e.g. IRA accounts) → Leveraged inverse (intraday tactical only).
- Duration: -1x inverse ETFs: days to a few weeks. Leveraged (-2x / -3x): intraday-to-multi-day only. Futures: quarterly with rolls. Puts: monthly with rolls.
- Trigger: Add hedges when macro/micro sentiment turns bearish (VIX spike, breadth deterioration, yield-curve stress) and trim them when conditions stabilize.