Short the top 3 ETFs of the FTSE 100 Index

With the Brexit deadline approaching, lingering uncertainty is putting pressure on the British economy. Given the cloudy economic outlook, some investors may be looking for ways to short-sell British stocks, betting that prices will fall.

The Financial Times Stock Exchange 100 Index (FTSE) is the benchmark index for stock trading on the London Stock Exchange (LSE). The index is pronounced by traders as “Footsie”, is a representative of the British stock market, and is considered an indicator of the health of the British economy. In addition, the rise and fall of the FTSE 100 Index will affect the sentiment of the US market in early trading, because trading on the London Stock Exchange begins six hours before trading on the New York Stock Exchange (NYSE).

Since the Brexit referendum on June 23, 2016, the Financial Times Stock Exchange 100 Index has experienced a period of increased volatility, during which the UK voted to leave the EU. Some market observers predict that before the next Brexit deadline, October 31, 2019, volatility will continue to exist and may even cause the stock market to fall sharply.

Key points

  • The Financial Times Stock Exchange 100 Index tracks the price movements of stocks traded on the London Stock Exchange.
  • The UK stock market experienced a period of volatility before the deadline for Brexit on October 31, 2019 loomed.
  • The uncertainty of Brexit has made some investors look for ways to short the British stock market.
  • If the UK stock market is in a downturn, buying reverse ETF shares on the FTSE is a profitable way.

Investors who wish to short the FTSE 100 Index may want to buy shares of an inverse exchange-traded fund (ETF), which increases in value when the FTSE 100 Index falls. These reverse ETFs are traded on the London Stock Exchange. If British stocks turn to the south, they should outperform the market:

  • Xtrackers FTSE 100 Short Daily Swap UCITS ETF (LON: XUKS)
  • L&G FTSE 100 Super Short Strategy Daily 2X UCITS ETF (London Stock Exchange code: SUK2)
  • ETFS 3x Daily Short FTSE 100 ETF (London Stock Exchange code: UK3S)

The information provided here is current as of September 13, 2019.

Xtrackers FTSE 100 Short Daily Swap UCITS ETF

Xtrackers FTSE 100 Short Daily Swap UCITS ETF was launched in June 2008 to replicate the performance of the FTSE 100 Short Index, which is the opposite of the FTSE 100 Total Return Announced Dividend Index. The FTSE 100 Total Return Declared Dividend Index is again the FTSE 100, and the ordinary cash dividends of the constituent stocks of the index are also considered.

When the FTSE 100 Total Return announces that the dividend index is going lower, the ETF’s stock will go higher. Please note that the ETF tracks the index daily rather than continuously, so it is not suitable for long-term investment. This is true for most inverse ETFs.

The fund’s net assets are 31.3 million pounds, or about 38 million U.S. dollars, and the dividend yield is 4.4%. The fund attempts to achieve its goals by investing in transferable securities and occasionally uses derivative technologies such as index swap agreements. It invests the net income of its stocks in over-the-counter (OTC) swaps and exchanges investment income with index performance.

L&G FTSE 100 Ultra Short Strategy Daily 2X UCITS ETF

The L&G FTSE 100 daily super short strategy daily 2X UCITS ETF started trading in June 2009. The fund’s goal is to track the FTSE 100 Daily Super Short Strategy Index, which is inversely proportional to the daily exposure of the FTSE 100 Index, with a change of twice the total return declared dividend index.

For example, if the FTSE 100 Total Return announced that the dividend index fell 2% in one day, the shares of the inverse fund should rise 4%, plus the interest earned on the proceeds from the sale of the index portfolio. The net assets of the ETF are £13.8 million, or US$17.2 million.

ETFS 3x Daily Short FTSE 100 ETF

ETFS 3x Daily Short FTSE 100 ETF was established in April 2014 to track the FTSE 100 Daily Ultra-Short Strategy RT Gross TR index. The index provides an inverse exposure that is three times that of the FTSE 100 Total Return Index, the FTSE 100 Index, and takes into account the total return on capital performance and the income from reinvested dividends.

For example, if the FTSE 100 Total Return Index falls by 2%, the ETF and its tracking index will rise by 6% before fees and adjustments are deducted. The fund has net assets of 8.3 million pounds or 10.3 million U.S. dollars, and its structure is debt securities rather than securities or stocks. Therefore, it can be redeemed by authorized participants on demand.

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