Leveraged and Inverse Index ETFs
Index ETFs offer many benefits to the traders. They can be used to simply trade an index, with or without leverage. They can also be "bought" to play the short side using inverse ETFs.
The list above covers the main three indexes along with the Russell 2000: SPY (S&P 500), QQQ (Nasdaq 100), and DIA (Dow 30), IWM (Russell 2000).
These ETFs move in equal percentages to the underlying index, thus they are "1X," or 1 times the percent change of the index.
There are 2X and 3X ETFs listed where are leveraged 2-times and 3-times the index, respectively.
Short, or inverse, ETFs are in the bottom half of the table and correspond to the four indexes as shown. They can also be leveraged.
One nice way to use the long ETFs is to hedge a portfolio. When the market is short-term overbought, one can buy an inverse ETF, such as the SH, in order to soften the potential losses from stocks that might decline.
The index EFTs are also a nice way to ease your way into trading the indexes with the ultimate goal of trading the emini futures.