The Nasdaq-100 Index ($IUXX) is showing some signs of stress, but it is not in a full-blown decline by any means. However, it caught the eye of one of the members of my investing club who wanted to know if you could apply an options collar – my favorite risk management strategy – to an inverse exchange-traded fund. And specifically to the UltraPro Short QQQ -3X ETF (SQQQ), which aims to move in the opposite direction of the Nasdaq-100, but with triple leverage applied. Wow.
After I got over the initial mind bending, it made a lot of sense. As with most hedging approaches, the money is made (or saved) by being out in front of the trouble.
