This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A New Short Treasury ETF Coming

NEW YORK ( TheStreet) -- Despite a growing controversy over the use of leveraged ETFs, ProShares has launched another inverse exchange-traded fund designed to short longer-term Treasuries.

The ProShares Short 20+ Year Treasury (TBF) is set to track the Barclays Capital U.S. 20+ Year Treasury Bond Index, an underlying index used for successful traditional funds.

Investors may be temped to believe that a "single" inverse Treasury fund like TBF would be less risky than other types of leveraged funds. The recent shakedown in the leveraged ETF business has taught investors otherwise. TBF, like other leveraged fund strategies, is a daily tracking ETF that is appropriate for sophisticated investors.

TBF will join four other ETFs in shorting longer-term Treasuries. ProShares currently offers UltraShort 7-10 Year Treasury (PST) and the UltraShort 20+ Year Treasury (TBT) funds. Both PST and TBT offer 200% short exposure versus the milder 100% short exposure set to be offered by TBF.

Rival leveraged fund issuer Direxion also offers a set of short Treasury funds. The Daily 10-Year Treasury Bear 3x Shares (TYO) and the Daily 30-Year Treasury Bear 3x Shares (TMV) offer even greater leverage than the ProShares strategies. TYO and TMV offer investors 300% short exposure to their underlying indexes.

ETFs do not necessarily have the qualities of the securities that they track. While the market for treasuries is typically highly liquid, there is no guarantee that TBF will garner enough investor attention to offer ample liquidity. It is likely that the leveraged used by TBF will also make this fund more volatile than the Treasuries it tracks.

Leveraged ETFs use instruments like futures and swaps to synthetically achieve their objectives. Rather than simply owning a basket of stocks or bonds, like many traditional ETFs, these funds amplify their indexes with derivatives. This results in complex strategies that are inappropriate for many retail investors.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
TBT $46.47 1.30%
TBF $25.28 0.62%
TMV $31.04 1.90%
TYO $17.52 -0.86%
TLT $123.23 -0.62%

Markets

DOW 18,070.47 +46.41 0.26%
S&P 500 2,114.39 +6.10 0.29%
NASDAQ 5,017.95 +12.5590 0.25%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs