SPDR Dow Jones Industrial Average ETF (DIA)

DIA is the best (and only) Dow Jones Industrial Average ETF for Q2 2022

By Matthew Johnston Full Bio LinkedIn Twitter Matthew Johnston has more than 5 years writing content for Investopedia. He is an expert on company news, market news, political news, trading news, investing, and the economy. He received his bachelor's degree in interdisciplinary studies from St. Stephen's University and his master's degree in economics at The New School for Social Research. He teaches macroeconomics at St. Stephen's University. Learn about our editorial policies Updated February 25, 2022

The geopolitical landscape turned ugly in February

Only two years ago, the global pandemic gripped markets across all asset classes, causing a significant downdraft in the stock market in early 2020.

In late February 2022, the geopolitical landscape turned ugly. In early February, at the opening ceremony of the Beijing Winter Olympics, Chinese President Xi and Russian President Putin met and agreed on a $117 billion energy deal and “no-limits” mutual support. The meeting and deals were a watershed event. Less than a week after the closing ceremony, Russia invaded Ukraine, claiming that Ukraine is not a country but Western Russia. The US and European countries consider Ukraine a sovereign country in Eastern Europe. As governments worldwide condemned Russia, China stood silent.

Russia’s invasion of Ukraine could be the first shoe to drop on the geopolitical landscape, and success in Ukraine could lead to invasions of other former Soviet satellites. Moreover, President Xi considers Taiwan a part of China, and Russia’s invasion could accelerate China’s reunification plans, triggering another geopolitical crisis.

Geopolitics are creating fear and uncertainty in March 2022, and the stock market does not do well in uncertain environments.

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How Does the UltraPro Short Dow30 Work?

Standard ETFs can replicate an index by simply buying the same stocks in the same proportion as the underlying index. For example, if the Dow has "X" amount of "ABC" company in it, then a standard ETF like DIA will also have "X" amount of "ABC" company in it.

SDOW is not a standard ETF—it is both leveraged and inverse. SDOW holds a complicated combination of derivatives like swaps and Treasury bills and cash to achieve those returns.

These swaps allow SDOW to take both bearish and leveraged positions, which would be impossible to achieve with outright ownership of stocks on or off the index.

The nature of swaps make SDOW an extremely risky product as they depend on other parties fullfilling an agreement.

Leveraged and inverse ETFs may not be right for the average investor. There are high risks involved in trading inverse and leveraged investment products. While 3x returns could mean a larger payout, it can just as easily mean a larger loss.

The single-day returns of this ETF are measured from one net asset value (NAV) calculation to the next. These daily returns compound; that means the returns over a period won't necessarily be the same as those single-day results.

Whether you lose or make money will largely come down to market timing, which is an extremely difficult aspect of trading to consistently get right.

ETFs Tracking Other Leveraged Equities

Links to a proprietary ETF Database rating for other ETFs in the Leveraged Equities ETF Database Category is presented in the following table.

Trading and researching ETFs

To compare online brokers for trading ETFs, read our online broker guide and use the StockBrokers.com comparison tool. I recommend Fidelity which has the best ETF research tools (ETF screeners, charting, third-party reports, etc) and overall experience for ETFs.

Top inverse ETFs

The following inverse ETFs are some of the most widely traded, with data as of Feb. 23, 2022.

ProShares UltraPro Short QQQ (SQQQ)

SQQQ offers three times leveraged daily downside exposure to the tech-heavy Nasdaq 100 index. This ETF is designed for traders with a bearish short-term view on large-cap technology names.

Fund issuer: ProShares

Expense ratio: 0.95 percent

Average daily volume: ~58 million shares

Assets under management: ~$1.41 billion

ProShares Short UltraShort S&P500 (SDS)

SDS offers twice leveraged daily downside exposure to the S&P 500 index. This ETF is designed for traders with a bearish short-term view on large-cap U.S. companies across sectors.

Fund issuer: ProShares

Expense ratio: 0.91 percent

Average daily volume: ~10 million shares

Assets under management: ~$522 million

Direxion Daily Semiconductor Bear 3x Shares (SOXS)

SOXS provides three times leveraged daily downside exposure to an index of companies involved in developing and manufacturing semiconductors. This ETF is designed for traders with a bearish short-term outlook on the semiconductor industry.

Fund issuer: Rafferty Asset Management

Expense ratio: 1.11 percent

Average daily volume: ~46 million shares

Assets under management: ~$140 million

Direxion Daily Small Cap Bear 3X Shares (TZA)

TZA provides three times leveraged daily downside exposure to the small-cap Russell 2000 index. This ETF is designed for traders with a bearish short-term outlook on the US economy.

Fund issuer: Rafferty Asset Management

Expense ratio: 1.10 percent

Average daily volume: ~22 million shares

Assets under management: ~$352 million

ProShares UltraShort 20+ Year Treasury (TBT)

TBT offers twice leveraged daily downside exposure to the Barclays Capital U.S. 20+ Year Treasury Index. This ETF is designed for traders who want to make a leveraged bet on rising interest rates.

Fund issuer: ProShares

Expense ratio: 0.92 percent

Average daily volume: ~9 million shares

Assets under management: ~$1.41 billion

ETFs Tracking The Dow Jones Industrial Average (300%) ETF Holdings

The following table presents holdings data for all ETFs tracking the Dow Jones Industrial Average (300%). For more detailed holdings data for an ETF click the ‘View’ link in the right column.

Inverse / Short Russell 2000 ETFs (1x, 2x, 3x)

ETF NAME TICKER LEVERAGE BENCHMARK INDEX
Short Russell 2000 RWM 1x Russell 2000
UltraShort Russell 2000 TWM 2x Russell 2000
UltraPro Short Russell 2000 SRTY 3x Russell 2000
Direxion Small Cap Bear 3x TZA 3x Russell 2000
UltraShort Russell 1000 Value SJF 2x Russell 1000 Value
Direxion Financial Bear 3x FAZ 3x Russell 1000 Financial Services
UltraShort Russell 1000 Growth SFK 2x Russell 1000 Growth
UltraShort Russell Mid Cap Value SJL 2x Russell Mid Cap Value
UltraShort Russell Mid Cap Growth SDK 2x Russell Mid Cap Growth
UltraShort Russell 2000 Value SJH 2x Russell 2000 Value
UltraShort Russell 2000 Growth SKK 2x Russell 2000 Growth

What is leveraged short selling?

Leveraged short selling lets traders use debt to increase their buying power. With the additional funds, traders often purchase futures and other financial derivatives to speculate on the stock or bond markets. By taking additional risk, traders seek to capture outsized returns.

Leveraged trading is also known as margin trading. The strategy can be risky because those bets often become outsized losses when a trade goes sour. Plus, traders need to pay back the borrowed funds along with any transaction fees.

Apart from these factors, traders have to pay short-term capital gains taxes, if the assets are in a taxable account. In addition, multiple fees are associated with trading on margin and short selling.

We follow trends – The path of least resistance remained lower as of March 4

As of March 4, 2022, the stock market faced geopolitical and economic headwinds.

The Dow Industrials SPDR product is a highly liquid ETF product with over $29.3 billion in assets under management. As of March 4, 2022, the APS was short the DIA ETF, which follows the DJIA. When the trend bends and our algorithm turns positive, we will close our short and go long the DIA.

Following trends via an algorithmic system requires strict adherence to rules. We do not attempt to pick bottoms or tops in any markets and are typically short at bottoms and long at tops. However, taking the most significant percentage out of trends requires removing emotional impulses from trading and investing. We ignore fundamentals, news, and all of the daily noise. Our signals are never intraday; they can only change at the end of a session. Our system does not get caught up in the daily frenetic trading activity. News and noise are at a frenzied level with the war in Ukraine.

The price of any asset is always the correct price because it is the level where buyers and sellers meet in a transparent environment, the marketplace. Crowd behavior that determines trends can be the optimal market approach across all asset classes. As of March 4, the crowd’s wisdom points to a bearish trend in the DIA ETF product.

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