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ProShares Short QQQ -1x Shares (PSQ $30.71)
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ProShares Short Russell2000 -1x Shares (RWM $16.27)
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BetaPro S&P/TSX 60 Daily Inverse ETF (CNDI $19.86)
Q: How are these ETF's created, and do they degrade as would a leverage ETF such as TQQQ? What would you suggest to be an equivalent on the Canadian markets?
5i Research Answer:
Leveraged ETFs (±2x, ±3x) show pronounced “volatility decay” because daily compounding of amplified moves (e.g., ±3x) magnifies buy‑high/sell‑low effects on choppy paths. A 1x inverse fund like PSQ does use derivatives and has the same structural mechanics, but without leverage, so the path‑dependency effect is much smaller; over weeks to a few months, the performance slippage versus a simple short is typically modest unless volatility is very high. Inverse tracking is still not exact. This year: RWM down 10.97% while Russell 2000 +12.97%. PSQ down 15.24% while Nasdaq QQQ +20.11%. The Canadian options remain very limited and thinly traded. CNDI (TSX 60, $14M in assets) about the only option.