Inverse ETF
An inverse ETF is an built to move in the opposite direction of its underlying index or benchmark on a given trading day, so that when the benchmark falls, the fund is designed to rise, and when the benchmark rises, the fund is designed to fall. It gives investors a way to profit from or hedge against a market decline without directly any securities themselves.
Inverse ETFs achieve this opposite exposure using such as swaps and rather than by holding the underlying securities. Critically, most inverse ETFs are designed to deliver the inverse of the benchmark's return for a single day only, and that daily reset means their returns over longer periods can diverge meaningfully from the simple inverse of the benchmark's return over that same period, especially in a or choppy market.
Because of this daily reset and the effect of , holding an inverse ETF for more than a very short period can produce a return quite different from what an investor might naively expect just from looking at how the underlying index performed over that stretch. These funds are generally built as short-term tactical tools for active traders rather than long-term holdings, and most fund providers explicitly warn against holding them for extended periods for exactly this reason.