Private investors typically buy into the market when they perceive an upward trend in the market. However, there frequently arises a scenario wherein it is possible to make profits when the opposite is true. It is also possible to benefit when there is an adverse report about a company’s business practice is known or when there is a downward trend in the market.

Single-stock Short & Leveraged Exchange Traded Products (S&L ETPs) are practically purpose-built for such scenarios. A large number of these ETPs are built around some of the most heavily traded U.S. tech and finance stocks, which presently account for a quarter of the S&P 500 and nearly half of the Nasdaq 100.

Shorting on Adverse Reports

In early August, it was reported that Micron Technology Inc (MU) would not be supplying components to Huawei following a ban on Huawei phone sales in the United States. MU accounts for about 0.2% of the S&P 500 index (GSPC). While the index had largely recovered from the pandemic-induced downturn that began in mid-January by this time and was holding steady, MU suffered a fall on account of a loss of a crucial customer.

Being invested into a -1x MU ETP – which is equivalent to a -1x daily short position in the stock – on 11th of August (when the company lowered guidance) for a period of 10 trading days would have yielded a substantial benefit to the investor: