SPXU: Inverse ETFs Are Generating Alpha

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About: ProShares UltraPro Short S&P 500 ETF (SPXU)
by: Dane Van Domelen
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Dane Van Domelen
Long only, ETF investing, portfolio strategy, bonds
Summary

A k-times leveraged ETF should have beta = k and alpha slightly less than 0 due to the expense ratio.

I recently reported on UPRO's alpha turning sharply negative to roughly -6% annualized.

Interestingly, the opposite trend is occurring for UPRO's bearish counterpart; SPXU (and other inverse ETFs) is generating positive alpha.

The recent alpha shift appears fairly persistent, meaning there may be an opportunity to profit.

An interesting recent trend for leveraged and inverse ETFs

About a month ago, I wrote an article about the 3x daily S&P 500 ETF UPRO, which I rely on heavily for my preferred stocks