UPRO - SQQQ: How Value Investors Can Bet On Mean Reversion

2024-04-16 07:15:25 ET

Summary

• The UltraPro Short QQQ ETF has a poor track record of losses, but can be used strategically by long-term investors.
• SQQQ is a leveraged bet against the Nasdaq 100, providing three times the inverse daily gains or losses.
• SQQQ can be used in pairs with other assets to create an alpha overlay strategy, expressing a bearish view on the Nasdaq 100 while maintaining exposure to other assets.

The UltraPro Short QQQ ( SQQQ ) is an ETF that most investors write off as a speculative, ultra-short-term play due to its aggressive, 3x leveraged bet against tech and/or growth stocks. Not only that, but SQQQ has produced cumulative losses of 66% and more than 99% in the past one and five years, respectively (see chart below). Why bother owning a fund with such a dismal track record?...

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