The ProShares UltraPro Short QQQ ETF (NASDAQ: SQQQ) stock price rose 1.10% after the leveraged inverse ETF announced a quarterly dividend payout of $0.2662 yesterday, translating into a yield of 1.33% at yesterday’s closing price.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
According to data from Google Finance, investors were pleased with the dividend payout, given that SQQQ shares closed up about 4.07%. SQQQ remains popular among investors despite consistently losing money as an inverse leveraged ETF that tracks the underlying Nasdaq 100 index.
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YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY
The Nasdaq 100 has been on a roll this year and is up 36.87% since the year began, which is impressive for an index that tracks 100 tech companies. On the other hand, SQQQ has fallen 61.80% for the year since it is a 3X leveraged ETF that falls when the underlying index price rises.
Investors can see that the decline in SQQQ is not 3X the gains of the Nasdaq index, which is expected given that the inverse ETF’s job is to generate 3X the daily returns of the underlying index and does not promise to generate 3X the long-term gains or losses of the index.
As standard, we always warn investors that leveraged inverse ETFs are risky investments due to the additional leverage and that they should trade them cautiously. As an investor, losing 61.8% of your initial investment in an asset that keeps falling is not fun.
However, many professional investors trade SQQQ as a hedge against some of their bets that rely on the Nasdaq index rising, just in case it decides to fall heavily. These investors are okay with losing their investment since the hedging risk was worth it.
Meanwhile, most retail investors should avoid leveraged inverse ETFs since most tend to lose money over time, with shareholders constantly being diluted by reverse stock splits to shore up the ETF's share price and make it attractive to buyers.
*This is not investment advice.
Proshares UltraPro Short ETF (SQQQ) stock price.
The Proshaes Ultra Short ETF (SQQQ) stock price rose 1.10% to $20.31 on the quarterly dividend payout.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.