Why I am Short $BIS Biotechnology

If you check the other posts on this blog, you can see I have taken short positions on a number of 3X ETFs.  These are designed to move 300% of the daily move of the underlying index.

A week or so ago I also shorted the Proshares Ultrashort Nasdaq Biotech, ticker $BIS, a Bear ETF.  The difference with this one is that it is only 200% of the underlying, which is pretty much equal to the $IBB. The Bull index for Biotech is the $BIB.  It’s easy to get confused on these.  You just have to pay attention to what you are working with.

The fact that it is 2X rather than 3X would make it less volatile in theory.  However, this is a Biotechnology index, which is already extremely volatile.  Also, it is likely that a 2X will decay less than a 3X, but again, these things aren’t guaranteed to work in the future the same way they worked in the past.

Still, if you are investing, it helps to have some reasoning. 

Looking at the year to date performance of the three listed:

$IBB is up 20.33%

$BIB is up 42.69%

$BIS is down 36.15%

Wait a minute. That’s not how it’s supposed to work, exactly.  $BIS is up more than 2X and up more than $BIS is down.  Strange things can happen using any particular data points.  If I were to run this on other timeframes, it may work.  Or not.  Either way, I am have multiple reasons for shorting $BIS.  Only time will tell if it works for me or not.

It wasn’t much of a day in the market.  A lot of volatility from the Jobs Report, the Dow and S&P were down slightly and the Nazz was up.  For a number of reasons, I had a very good day.  I didn’t recoup all of yesterday’s losses, but close.  See my overall positions below. 

	Close	Initial Short	Gain (Losss)
NUGT	9.79	10.47	0.68
BIS	29.38	29.75	0.37
TZA	9.65	9.90	0.25
VIXM	54.96	54.60	(0.36)
RUSS	35.32	30.40	(4.92)
CORN	23.18	22.68	(0.50)
FAZ	11.38	11.45	0.07
UVXY	40.73	40.68	(0.05)
FXP	27.96	27.58	(0.38)