When volatility hits major market indexes, it can spark a sense of angst. But for short-term traders, market fluctuations open the door for opportunities. This is especially the case with leveraged/inverse exchange traded funds.
Furthermore, market volatility isn’t relegated to a single day or week. With a presidential election in full swing, heavy market fluctuations could result in the coming months.
“The churn will probably continue through September or October, until the November elections,” veteran investment strategist Ed Yardeni told Yahoo Finance.
In addition to elections, the constant market news mover will be what the Federal Reserve does with interest rates. Much of the capital markets are expecting a cut in the fall. But how often, the size, and the frequency of the cuts can also ignite market volatility.
Traders combing the markets for opportunities during times of heavy volatility can look to leveraged funds that focus on the S&P 500. If the bullish trend reverses and the bears enter the market, traders can also seek opportunities in inverse ETFs as opposed to selling individual stocks short in the options/futures market.
The added leverage allows traders to maximize their gain potential when markets trend higher or lower. Having that flexibility allows traders to stay tactical in the markets irrespective if the S&P 500 is trading higher, lower, or sideways.
If the trend continues to skew toward the upside, traders who want triple their exposure to the S&P 500 will want to continue with the Direxion Daily S&P 500 Bull 3X Shares ETF (SPXL ). However, in the event of a market correction, taking the other side with the Direxion Daily S&P 500 Bear 3X ETF (SPXS ) is the ideal countermove.
Tech Offers More Opportunities
The tech sector, particularly large-cap tech giants, comprise a sizable portion of the S&P 500. As such, their performance can sway the movements in the S&P 500, allowing traders to capitalize on more concentrated plays in tech.
If that’s the case, traders will want to look at the Direxion Daily Technology Bull 3X ETF (TECL ) when bullishness is abound. On the other end of the spectrum, they can use the Direxion Daily Technology Bear 3X ETF (TECS ). Both funds provide exposure to 300% of the of the daily performance of the Technology Select Sector Index, which is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector.
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