Inverse exchange-traded funds (ETFs) allow investors to gain from poor performance of a group of assets such as stock indexes. Inverse funds are typically less popular than corresponding long funds, and some inverse trackers of U.S. stock sectors are relatively small and thinly traded as a result. Financials, energy and technology are the most popular sectors for inverse ETFs, providing investors the most liquidity and diversity of options. Many of the less-popular sectors are thinly traded, creating significant liquidity issues.
The Direxion Daily Financial Bear 3X ETF (NYSEARCA: FAZ) provides inverse tracking of the Russell 1000 Financial Services Index. The fund was among the largest inverse sector ETFs with $365 million in assets under management (AUM) and average daily trading volume of 2.26 million shares as of July 2016. The ProShares UltraShort Financials ETF (NYSEARCA: SKF) has $59 million in AUM, and the ProShares Short Financials ETF (NYSEARCA: SEF) has AUM of $44 million.
The Direxion Daily Energy Bear 3X ETF (NYSEARCA: ERY) provides leveraged market-cap-weighted exposure to energy companies of the Standard & Poor's 500 Index. As of July 2016, the fund's AUM was $75.4 million and average daily trading volume was 2.04 million. The ProShares UltraShort Oil & Gas ETF (NYSEARCA: DUG) and the Direxion Daily S&P Oil & Gas Exploration & Production Bear 3X ETF (NYSEARCA: DRIP) are smaller funds providing slightly different exposures.
The Direxion Daily Technology Bear 3X ETF (NYSEARCA: TECS) inversely tracks the S&P Technology Select Sector Index. The fund's AUM was $18.6 million as of July 2016, and average daily trading volume was 53,300 shares. The ProShares UltraShort Technology ETF (NYSEARCA: REW) and Direxion Daily Technology Bear 1x ETF(NYSEARCA: TECZ) are smaller inverse tech ETFs.
The ProShares UltraShort NASDAQ Biotechnology ETF (NYSEARCA: BIS) and the Direxion Daily S&P Biotech Bear 3X (NYSE: LABD) are relatively large funds that provide inverse exposure to the biotech industry, but this is only a portion of the health care sector. The ProShares UltraShort Health Care ETF (NYSEARCA: RXD) provides broader sector exposure by inversely tracking the Dow Jones U.S. Health Care Index. RXD had AUM of $2.8 million and average daily trading volume of 1,588 shares as of July 2016, both of which are relatively low.
The ProShares UltraShort Basic Materials ETF (NYSEARCA: SMN) is the largest inverse basic materials sector fund, providing market-cap-weighted exposure to the Dow Jones U.S. Basic Materials Index. SMN had AUM of $14.5 million and average daily trading volume of 14,900 shares as of July 2016. The ProShares Short Basic Materials ETF (NYSEARCA: SBM) is a lower-leverage version of SMN. Despite tracking the same index as SMN and having similar AUM, SBM has much lower daily trading volume.
The ProShares UltraShort Consumer Services ETF (NYSEARCA: SCC) is the only inverse fund covering the consumer discretionary sector, tracking the Dow Jones U.S. Consumer Services Index. The fund is exposed to industries such as media, specialty retailers, travel and entertainment. It is relatively small and thinly traded, with AUM of $2.5 million and average daily trading volume of 1,300 shares as of July 2016.
The ProShares UltraShort Consumer Goods ETF (NYSEARCA: SZK) is the lone inverse ETF covering the consumer staples sector, and it tracks the Dow Jones U.S. Consumer Goods Index. SZK is heavily exposed to tobacco, food and basic household goods industries. It is even smaller and more thinly traded than SCC, with AUM of $2.06 million and average daily trading volume of 1,100 shares as of July 2016.
The ProShares UltraShort Industrials ETF (NYSEARCA: SIJ) is the only inverse ETF covering the U.S. industrial sector, and it tracks the Dow Jones U.S. Industrials Index. SIJ's performance is influenced by industries such as machinery, aerospace and conglomerates, with 10% exposure to General Electric Company (NYSE: GE). As of July 2016, SIJ had $3.6 million in AUM and average daily trading volume of 1,800 shares.
The ProShares UltraShort Utilities ETF (NYSEARCA: SDP) inversely tracks the Dow Jones U.S. Utilities Index. The fund has market-cap-weighted exposure to 64 utilities firms. SDP had $4.2 million in AUM and average daily trading volume of 6,100 shares as of July 2016.