SOXS - SOXS: Resist The Temptation To Short Semiconductor Stocks With Inverse Levered ETFs

2024-02-26 05:38:51 ET

Summary

• The Direxion Daily Semiconductor Bear 3X Shares ETF provides -300% exposure to the daily return of the NYSE Semiconductor Index.
• Even contrarian investors should avoid the SOXS ETF due to tracking error caused by positive convexity and volatility decay.
• Historically, the SOXS has underperformed during market crashes as those events are usually accompanied by volatility spikes, which lead to elevated volatility decay.

With equity markets making daily new highs led by the 'Magnificent 7' stocks and bearish market pundits comparing NVIDIA Corp.'s ( NVDA ) meteoric rise with Cisco ( CSCO ) during the dot-com bubble era (Figure 1), should contrarian investors short the semiconductor sector with the Direxion Daily Semiconductor Bear 3X Shares ETF ( SOXS )?...

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