– ETF Watchlist –
It is not out of the realm of possibility that we get a pull back soon. If we just look at SPY, we are just starting to break into another supply zone, a zone where big sell order were sitting in the past and unfilled sell orders could still be lying in wait.
This gives us a suspicion that soon could be a good time to look for put plays. Now, we could go the old fashioned route an find some levels to swing puts on ETFs like SPY and QQQ, but we can also buy equity on some bearish leveraged ETFs for a little more of a safer play, or buy calls on one of those ETFs. Let’s look at an example for when the time of a pullback comes.
ProShares UltraPro Short QQQ (SQQQ)
SQQQ is a great example of one of the leveraged ETFs we can look to in preparation for a pull back, which are always bound to happen at one point or another, the only question really becomes the severity and length of the pull back. Every hot market needs to blow off some steam. For more conservative types, going long equity on SQQQ can be a bit of a more relaxed way to get ahead of a little downside movement.
However, those looking for a more aggressive approach can buy call options on the ETF. That may sound counterintuitive, but since the ETFs price goes up if the market goes down, then you would want to go long this ETF, which means you’re really going short the market.
Of course, you can certainly go the old fashioned route and short SPY or QQQ, but we would be remiss if we didn’t at least give you some different options here. See what works for you and execute!
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Good Luck With Your Trading!
Christian Tharp, CMT
This post was originally published on Wealthpop