What Is the UltraPro Short QQQ (SQQQ) ETF?

Established in February 2010 by ProShares, the UltraPro Short QQQ (SQQQ) is an 澳洲幸运5官方开奖结果体彩网:inv𓆉erse-leveraged exchange-traded fund (ETF) that tracks the Nasdaq 100 Index. The Nasdaq 100 is composed of the largest companies, both domestic and international, listed on the Nasdaq stock market, prioritized by total market capitalization but excluding financial institutions.

All inversely leveraged funds are made up of financial derivatives and sometimes ❀even der⭕ivatives of derivatives. To achieve the opposite of a specific asset, the fund managers have to trade in short positions and swaps, which essentially are bets that the underlying security or investment will perform poorly.

Understanding the UltraPro Short QQQ (SQQQ) ETF

The fund provider for SQQQ, ProShares, was launched in 2006 and focuses on specific, targeted, and relatively risky satellite holdings. Most of its ETFs are moderately small or very small, and SQQQ is no exception; total assets under management, or AUM, as of Aug. 20, 2023, was $4.56 billion.

The inverse-leveraged strategy for SQQQ means it attempts to reproduce a daily investment result that is roughly opposite the daily performance of its underlying index, and then multiply those results by a certain factor. The stated objective of SQQQ is to triple the opposite results of the Nasdaq 100.

This means investors in SQQQ are preparing for the greater nonfinancial stock market to struggle. Since the Nasdaq 100 tends to be heavily weighted toward technology, telecommunications, and 澳洲幸运5官方开奖结果体彩网:healthcare stocks, the SQQQ should tend to perform well when these sectors perform po🦹orly.

🔜 To finance the leveraged inverse position, the ETF also ⭕owns a large amount of U.S. Treasury securities from the proceeds of short positions.

UltraPro Short QQQ (SQQQ) ETF Performance

As of Q2 2023, SQQQ had a trailing five-year beta of -2.88 and an alpha of -31.79. Its Sharpe Ratio was -1.03. While these are considered somewhat in line with the fund category, they are considerably more risky than the average ETF or mutual fund.

Dis💯advantag🌟es of the UltraPro Short QQQ (SQQQ) ETF

Inverse-leveraged ETFs come with many distinct disadvantages for investors who prefer to hold their assets for growth or who don't have the time it takes to manage gains from these instruments:

• SQQQ is a daily-targeted inverse ETF. ProShares designed this for short-term, high-risk, and high-reward gains if the Nasdaq 100 struggles.
• This fund is unsuitable for a long-term hold; investors who buy and hold SQQQ find their returns badly damaged by expenses and decay.
• Several key factors prevent SQQQ from serving as an acceptable core holding in an investor's portfolio.
• Tiny ETFs such as SQQQ can go through wild fluctuations and are always close to closing altogether.
• The share prices for SQQQ bank on a deviation from historical market performance. The Nasdaq 100 Index does not perfectly correlate with total stock market performance, but it is certainly a cyclical index. Since the general trend of the Nasdaq is to grow over time, the long-term outlook for a 3x inverse-leveraged ETF is bleak at best.

Advantages of the UltraPro Short QQQ (SQQQ) ETF

There are so♐me advantages to having a daily-targeted leveraged ETF:

• Considerably more liquid than other funds of its size.
• Designed to profit from a market decline rather than relying on a market increase.
• Works as a hedge against an expected decline
• Provides investors who enjoy daily market and investing activity an opportunity to profit

The Bottom Line

Proshares UltraPro Short QQQ is an inverse-leveraged exchange-traded fund designed to perform three times the opposite of the Nasdaq 100. As an inverse-leveraged product, it is best used by investors who prefer daily🐷 investing🎀 results.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our 澳洲幸运5官方开奖结果体彩网:warranty and liability disclaimer for more info. As of the date this article was written, the author does not own SQQQ.