How I’m Betting Against A Crashing Market
Since I’ve been writing about how markets are going to crash, I thought I’d put my money where my mouth is and bet against the market. This is not investment advice anymore that noting that red sometimes turns up in Roulette.I’m just betting that the markets will go red.
To do on retail platforms like eToro one can sell individual stocks short, or you can hedge with investments you think might go up (like gold), but what I’ll talk about here is the simplest thing my idiot brain could understand. Inverse ETFs, or bear funds.
For example, in yesterday’s relatively minor crash, every index and many stocks shed value. On the other side, however, inverse funds, increased by the same or more amount (because some are leveraged up). Note that this is very risky and in the long-term these bear funds usually look shit.
Here’s the ticker for SPXU over 3 years:
As you can see, however, right now it’s ticking up. If you zoom even closer, this thing moved 12% in a single day, while things like UVXY moved 21.56%. Which is huge (these things are levered up, delivering -1.5x or -3x whatever the market does). That also means they can complete explode your money when the market goes up.
I was cautious and only bought after the market starting crashing yesterday, so I didn’t get that whole upside at all. I invested in the more cautious inverse funds (SQQQ, SPXU, and SRTY) and saw only 5%, 5.79%, and -0.5% returns (respectively). On the last one I just got in way too late. What I should have done is buy while the market was good yesterday, but this is literally my first trading and I was scared.
As you should be too, after reading that last sentence. This is not investment advice, I’ve never done this before. There are obviously more sophisticated ways to bet against the market. I’m just an idiot coming into the casino off the street and putting money on red. I don’t know exactly when it’s going to turn up, but I know it always does.
I put about $800 in and made $27, for a 3.35% return in a day. Woo-hoo, right, but that’s basically what I earn in a day from Medium. If I’d gotten in earlier I could have gotten much more. However, if things had gone different I could have easily lost 20%. Note that I also bought some lithium and fertilizer stocks that I thought would hedge, but they also lost value in the general panic. The truth is that all stocks are ultimately chips in a casino, it’s not really about earnings or dividends.
As Jamie Merchant says in a great long read: