What Is SQQQ? The ProShares UltraPro Short QQQ ETF (2024)

FAQs

What is SQQQ and how does it work? ›

SQQQ is an aggressive take on the large-cap space by providing geared inverse (-3x) exposure to the NASDAQ-100 index an index of 100 tech-heavy firms listed on NASDAQ that excludes financials. To provide this exposure, the fund uses swaps on the popular NASDAQ-100 ETF (QQQ), swaps on the index itself, and futures.

Key Takeaways. The ProShares UltraPro Short QQQ (SQQQ) is a 3x leveraged inverse ETF that tracks the Nasdaq 100. It seeks to return the exact results of the Nasdaq 100 index times negative three.

ProShares UltraPro Short QQQ (SQQQ) has a higher volatility of 15.34% compared to Invesco QQQ (QQQ) at 5.12%. This indicates that SQQQ's price experiences larger fluctuations and is considered to be riskier than QQQ based on this measure. The chart below showcases a comparison of their rolling one-month volatility.

Is ProShares UltraPro Short QQQ ETF A Buy? SQQQ holds several negative signals and we believe that it will still perform weakly in the next couple of days or weeks. We, therefore, hold a negative evaluation of this ETF.

For any holding period other than a day, your return may be higher or lower than the Daily Target. These differences may be significant. Smaller index gains/losses and higher index volatility contribute to returns worse than the Daily Target.

What this means in layman terms is that the SQQQ is only designed to provide 3x inverse returns for one day. For any holding period longer than 1 day, the returns expectations will differ.

ProShares UltraPro Short QQQ (SQQQ)

If the Nasdaq-100 falls 1% over a day, then the fund is expected to return 3%. Since SQQQ's leverage resets on a daily basis, holding the fund beyond a single day may compound returns and provide results that are different from the target return.

ProShares UltraPro Short QQQ® (the “Fund”) seeks daily investment results, before fees and expenses, that correspond to three times the inverse (-3x) of the daily performance of the Nasdaq-100® Index (the “Index”).

The fund aims to provide 3x the daily performance of the NASDAQ 100, primarily focused on tech stocks with larger weightings in the 'Magnificent 7'. However, some experts are cautious due to extended valuations in the broader tech index. Overall, investors are advised to be very cautious when considering this strategy.

The application of leverage amplifies both prospective gains and potential losses, making SQQQ especially susceptible to market volatility. Moreover, due to its inverse correlation with its underlying benchmark, when markets are thriving, this ETF may experience losses.

Should I hold SQQQ long term? ›

Since the market traditionally goes up over the long term, SQQQ ETFs are not a viable long-term strategy and should instead be used for temporary potential gain.

Given its high-risk profile and potential for rapid loss, SQQQ is generally considered suitable only for short-term trading or as a component of a hedging strategy during market downturns.

SQQQ has a dividend yield of 8.68% and paid $1.04 per share in the past year. The dividend is paid every six months and the last ex-dividend date was Mar 20, 2024.

The SQQQ ETF seeks to track the Nasdaq-100 index and provide a 3X inverse return before fees and expenses. In theory, if the Nasdaq-100 falls 1%, then the SQQQ ETF should rise by 3%. On the other hand, the TQQQ ETF seeks to track the Nasdaq-100 index and provide 3X the return before fees and expenses.

Given its high-risk profile and potential for rapid loss, SQQQ is generally considered suitable only for short-term trading or as a component of a hedging strategy during market downturns.