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?

[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.