I have a confession to make. I’ve never shorted a stock or ETF in my life. That’s right, the guy who ran a few “long-short” mutual funds has never shorted anything. Or have I?
You see, shorting involves borrowing shares, and taking the risk that the stock or ETF could move against you. Infinitely. There’s no limit to how much you can lose. Whereas with buying a put option, if you are the buyer, you can only lose the capital you put up.
I’ve always been very comfortable with that tradeoff: unlimited upside, limited downside. It even feels good to type it here!
I’ve used put options a lot over the decades, but I’ve also used many, many inverse ETFs. Those are the ones structured so that on a daily basis, whatever the stock or ETF or index does, the inverse ETF moves in the opposite direction.
Or, in the case of leveraged inverse ETFs (a mouthful, I know), it could be 2-3 times as volatile, both ways. In fact, the more I use leveraged ETFs long and inverse, the more I look to them as an option replacement or at least a surrogate.
Leveraged long ETFs sub into the game for call options, and leveraged inverse ETFs for put options. The next time market volatility kicks way up, that approach will be the only game in town for a while. Because trying to buy options with a Cboe Volatility Index ($VIX) at 25, 30, or higher gets prohibitively expensive.
While inverse ETFs on major indexes have been around for nearly 20 years, I’d like to introduce (or re-introduce) a more contemporary version of “shorting without shorting.” It is a new crop of ETFs that essentially aim to provide short-like exposure to individual stocks. In other words, what investors like me have looked forward to for a long time. And a short time!
Inverse Single Stock ETFs: The Short and Long of It
The list keeps growing, but I’ll highlight three of them here, since they hit my radar as “interesting stocks to bet against, but they also have inverse ETFs available, either in -1X or -2X format.” Remember, there’s a learning curve here, so be very careful before you plunge into these with more than a token amount of capital.
One question I get frequently on these ETFs is whether to look at the chart of that inverse security, the underlying stock, or both. My response: Definitely the stock first, since the only way the inverse ETF doesn’t move opposite and to the same degree on a daily basis is if the ETF is flawed in its construction. And I don’t see that much, if at all.
The inverse is OK to look at, but the charts are often rendered less helpful when the underlying stock is trending rapidly in either direction. The math of loss comes to the fore in those cases. So here, I’ll show the charts of the 3 stocks with interesting inverse ETFs, but only state the tickers of the inverses.
Stock #1: Tesla
Among the Magnificent 7 stocks, Tesla (TSLA) looks the worst to me here.
To try to make a profit on the misfortune of TSLA shareholders, should the stock turn its recent dip into a bigger decline, the Direxion TSLA Bear -1X ETF (TSLS) is one of several peers lining up to de-Musk portfolios. That’s a treacherous chart to me, with the Percentage Price Oscillator (PPO) tipping over and the stock just coming off a double-top from a year ago.
Stock #2: Coinbase
Imagine that, a crypto stock making this list? OK, not so surprising these days. Coinbase (COIN) is in rough shape here, and it will take a real trend reversal to right the ship in early 2026. If COIN keeps falling, the Graniteshares -2X Short Coin Daily ETF (CONI) should keep rising, by a factor of 2. It’s a double-inverse ETF.
Stock #3: Rigetti Computing
It is hard for me to look at Rigetti Computing (RGTI) and not immediately think of New York Yankee pitching great Dave Righetti. But the spelling is different. And when it comes to finding the strike zone for investors, RGTI has been, shall we say, just a bit outside. It’s 60% off its October high. And it is hanging by a thread.
So in the same way that the aforementioned hero in pinstripes came in to save a lot of baseball games, those looking for relief might like the DeFiance Daily Target 2X Short Rgti ETF (RGTZ), another 2X inverse fund.
I encourage traders to learn more about this new defensive weapon in ETF form. For me at least, it has allowed me to finally try to profit from single stock declines in a way that was never possible for those of us who do not want to be caught “short.”
Rob Isbitts, founder of Sungarden Investment Publishing, is a semi-retired chief investment officer. For more of Rob’s research and investor coaching work, see ETFYourself.com on Substack. To copy-trade Rob’s portfolios, check out the new Pi Trade app.
On the date of publication, Rob Isbitts did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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