Ultrashort Technology a Good Hedge against Panic-Selling

I've been sticking with five Ultrashorts - covering commercial real estate, small caps, financials, China, and foreign emerging markets. I am going to add a technology Ultrashort ETF to make my exposure six names.

I am starting a position in Ultrashort Technology (REW) which can work as a hedge against my Apple, Research in Motion, etc type of positions. I'm beginning with a simple 300 share exposure (roughly $21K) or 1.9% of the fund but as with all my Ultrashorts I add/decrease these incrementally often. EDIT: Instead purchased 425 shares or 2.7% position. So if the market weakens considerably, I'll probably add more here. The current price is $68s/$69s... in the panic lows Tuesday this spiked to low $80s.

Here is a link to the ETF's home page

Its goal is as follows

UltraShort Technology ProShare seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Technology IndexSMThe Dow Jones US Technology Index is as follows (top 10 names)MSFT 13%
AAPL 7.6%
CSCO 7.2%
GOOG 7.1%
INTC 6.8%
IBM 6.5%
HPQ 5.7%
ORCL 3.9%
QCOM 2.8%
DELL 2.1%

I actually like many of the names above from the long side, but again if we get some more of that panic selling, at least I have some exposure to the inverse of these positions. The reversal Friday in Microsoft (MSFT), which is actually down after a stellar earnings report, is in a word... troubling. Again, this at least gives me some NASDAQ-specific "insurance".

The other name I was considering was Ultrashort QQQ (QID) which is double the inverse of the Nasdaq 100 Index.

The top positions there are as follows:

AAPL 13.7%MSFT 6.5%GOOG 5.6%QCOM 4.1%RIMM 3.6%CSCO 3.3%INTC 3.1%ORCL 2.7%GILD 2.4%EBAY 1.9%

So its essentially the same theme - I overlayed the performance of the two instruments over three month and six month time frames and they were relatively similar; so I could pick either one and probably would get a similar result.

Disclosure: Long Ultrashort Technology in fund; no personal position

Comments

[eyekew:]

I'm curious....what percent of your fund is in tech?

2008 Jan 28 01:12 PM

[TraderMark:]

Hi. Roughly 10%. It is hard to find good tech companies nowadays... and most of the best are already quite big. So not the same opportunities as in other parts of the market IMO.

2008 Jan 28 05:58 PM