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(Bloomberg) — ETF merchants simply positioned a report wager in opposition to the large comeback in tech shares.
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Because the Nasdaq 100 Index soared late final week, some $658 million was funneled into the ProShares UltraPro Quick QQQ exchange-traded fund (ticker SQQQ). That’s the largest-ever influx for a product that goals to ship thrice the other efficiency of the US benchmark for main know-how firms.
The influx got here on Thursday, simply because the Nasdaq posted its largest leap in additional than two years on hopes that softer-than-expected inflation information can persuade the Federal Reserve to gradual its tempo of financial tightening.
As cash flowed to SQQQ, traders pulled $256 million from its bullish leveraged sibling, the ProShares UltraPro QQQ ETF (TQQQ). That was the biggest outflow since January, in line with information compiled by Bloomberg.
Whereas the gauge superior once more on Friday, the SQQQ inflow constitutes a large wager that the tech-led rally will show fleeting for the reason that ETF is designed to work on an extremely short-term foundation.
Futures for the Nasdaq 100 have been down 0.6% as of 9:14 a.m. in New York.
“Instruments like SQQQ have been principally designed for large strikes like we’ve been seeing the place traders — and doubtless extra importantly hedge funds — wish to take robust positions counter to huge strikes,” mentioned Dave Nadig, monetary futurist at information supplier VettaFi. Giant gamers are doubtless utilizing it for “fast inverse publicity to specific their lack of religion within the rally,” he mentioned.
The bearish inflows boosted belongings in SQQQ to about $3.6 billion, greater than double their degree initially of 2022. In the meantime the Invesco QQQ Belief Collection 1 ETF (QQQ), a vanilla product monitoring the Nasdaq 100, acquired $1.9 billion Thursday. Its belongings now complete $162 billion, down from $218 billion within the early new yr due to the curiosity rate-induced rout in development shares.
Settlement preparations for SQQQ and TQQQ imply that move information arrives with a one-day lag.
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