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Despite a 6% pullback in semiconductor stocks, the SOXS ETF has lost 6%, highlighting its ineffectiveness as a hedge due to volatility decay. SOXS ETF's reset of daily exposure leads to significant long-term losses, with a -70.9% CAGR over 10 years, making it an abysmal investment. Investors should consider put options on individual overvalued stocks or sector ETFs like SOXX for defined risk and reward, avoiding SOXS's open-ended decay.
The Direxion Daily Semiconductor Bear 3X Shares ETF provides -300% exposure to the daily return of the NYSE Semiconductor Index. Even contrarian investors should avoid the SOXS ETF due to tracking error caused by positive convexity and volatility decay. Historically, the SOXS has underperformed during market crashes as those events are usually accompanied by volatility spikes, which lead to elevated volatility decay.
Shorting stocks/going long inverse funds is not a winning strategy over time. Direxion Daily Semiconductor Bear 3X Shares ETF offers investors the opportunity to profit from a downturn in semiconductor stocks. SOXS provides triple inverse leverage, but comes with significant risks and potential for significant losses.
I believe semiconductor stocks are at high risk due to limited benefits from AI, weak earnings, US-China trade war risks, recession risk, and high valuation levels. I recommend the Direxion Daily Semiconductor Bear 3X Shares ETF as a way to profit from the potential decline in semiconductor stocks during a recession. SOXS is designed to provide three times the opposite daily return of the ICE Semiconductor Index and has the potential to double or more if the index falls 30%+.
FAQ
- What is SOXS ETF?
- Does SOXS pay dividends?
- What stocks are in SOXS ETF?
- What is the current assets under management for SOXS?
- What is SOXS average volume?
- What is SOXS expense ratio?
- What is SOXS inception date?