Top 3x ETFs to short if I think a stock market crash is imminent
Here's a list I would work off
When I use the term “short”, I mean to buy Put options.
Let’s use the term crash to represent anything >15% drop in the S&P 500.
That would take the S&P from ~$4,480 to ~$3,800.
To understand why I think a stock market correction could be due in months, and perhaps weeks, go here:
Now before I go any further:
We’ve looked at the correlation between M2NSA and the Wilshire 5000 using the Fed’s data and seen that, normally they are tightly correlated, but the current divergence is around 15-20%.
That doesn’t mean a stock market crash will be contained at 15-20%.
That doesn’t mean there will be one precipitous drop vs. a prolonged slow drop.
That doesn’t mean there can’t be a course correction which opens up the economy and boosts money supply growth that will keep the market afloat a while longer.
You have to consider all of the angles before you make a play like this.
That being said here, if you were inclined to eat a few premiums to play Put options on the stock market, here’s what I am targeting ranked from Best Play to Worst:
TECL - Direxion Daily Technology Bull 3X Shares ($57.43): Tech companies love the pandemic. Following the lockdown panic, shares of TECL plummeted to ~$8.50. They are up nearly 600% since then. This sector is a bubble waiting to burst, and when it does TECL will drop like a stone. Just a 33% loss of its underlying value would wipe out this 3x ETF completely. In fact, it could take even less when you consider margin interest, fees and the possibility of contango.