Contrarian ETFs Grow

The ProShares family of inverse exchange-traded funds is benefiting as investors increase their bets on declines in the prices of stocks.

One way to profit when stocks fall is to establish a short position, which entails borrowing a security and then selling it in the hope of buying it back at a lower price. You then return the shares and keep the difference.

Another option is to buy a mutual fund or exchange-traded fund that moves in the opposite direction of the market. When stocks plummeted two weeks ago, that is what a lot of investors opted to do.

On Feb. 27, the Dow Jones Industrial Average fell 416 points, or 3.3% -- the largest one-day point loss since the market reopened after the Sept. 11, 2001, terrorist attacks. Meanwhile, the S&P 500 and the Nasdaq fell 3.5% and 3.9%, respectively.

"(That) was a wake-up call for many investors. ... We have had incredible interest in the products ever since," says Michael Sapir, chief executive of ProShare Advisors.

ProShares offers 52 ETFs, 29 of which are designed to move in the opposite direction of the indices they track. Some of the inverse products are "ultra short," using leverage so that when the market falls, they rise twice as much, or when the market rises, they fall twice as much. (ProShares also has "ultra" ETFs that move in the same direction as the market but use leverage to return twice as much.)

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