The nasdaq has a slight bubble, protect the downside with SQQQ

EBITDAtiger Updated   
NASDAQ:SQQQ   ProShares UltraPro Short QQQ
This is not investment advice, do your own homework and evaluate how much you can tolerate risking.

SQQQ is triple leveraged to the downside on the QQQ, which is the ETF that directly tracks the NASDAQ. As 2021 has begun to play out, it has become more and more apparent that these overvalued tech and software companies are out way past their skis in terms of multiples.

SQQQ provides the perfect protection to these lofty tech stocks as VOLQ is not available on most platforms. VOLQ is the NASDAQ's Vix, which would be my preferred way of protection for the downside but unfortunately is not available for trade on the brokerages I use.

So essentially for every 1% that the QQQ (proxy for the NDX ) falls, SQQQ rises by 3%. Since it is so heavily inversely correlated, it makes for a great hedge.

When implementing a strategy such as this into your portfolio, I would recommend starting with a meager 1-3% position and no more than 5%. Another solid alternative strategy that is a good permanent piece of a stable portfolio is a market neutral fund.
Another note about employing strategies like market-neutral or leveraged short ETFs is that you can use it as a placeholder/store-of-buying power. When the market corrects or if it ever crashes again, these holdings will hit their all-time highs, allowing you to sell for major gains to use to double down on ur holdings that are red but you still have conviction in the long-term.

Having a constant position in a market-neutral would be recommended with periodic reinvestment. Having a leveraged short ETF would only be recommended when the market is feeling top-ish or you need some sort of inversely correlated asset. So for instance, I always hold BTAL and add more shares, but I am in and out of SQQQ. I keep about 5% in the market-neutral and only 1% in the levered short. Right now I am in. It is at 52-week range lows and if the NASDAQ corrects this stands to benefit and is easier than firing off a put option/spread and worrying about timing.


The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.