Inverse or leveraged ETFs are terrible for anyone except for day traders. You can't buy and hold them, because they degrade over time, especially the leveraged ETFs. If you really want to short, then short the stock directly with proper stop losses or buy puts, but options are very complicated with various types of premium, most importantly time premium which also causes prices to degrade.

Correct in principle — from what I recall, leverage ETFs' beta decay over time is caused by the overhead of the leverage. You can see this with SH, for example; while it seems to perfectly mirror SPX, there's a slow rate of value loss over time.

However, if you look at ETFs like TMF over time, short-term gains easily overcome the decay. If you'd invested in TMF on Jan 1, you'd be up 92% now.

And it's not like options and shorts don't come with premiums. There's no free lunch, but there's the possibility of returns wildly beyond your initial investment.

Inverse and short ETFs are terrible for medium to long term holdings. Because it resets each day. Here is an example of what this means:

Consider a hypothetical index having a volatile week (like these days). The index was at 100 on day 1, dropped to 90 on day 2, recovered back to 100 on day 3, rose to 110 on day 4, and finished the week flat at 100.

If you were invested in an ETF that tracks the index, you would neither lose nor profit. But if you were invested in an inverse ETF, you actually lost money overall: the percentage day change of the index is -10%, +11.1%, +10%, -9.1%. So the percentage day change of the inverse ETF is +10%, -11.1%, -10%, +9.1%. Add one and multiply these, and you would have lost 4% overall. This is not even accounting for the increased expense ratios of these ETFs.

But wait, here's more: if you were invested in a 2x leverage ETF, you would have lost 4% as well! The percentage day change would be -20%, +22.2%, +20%, -18.2%. Add one and multiply these and you arrive at the same number.

This is simple math. And I think, this should convince everyone that inverse and leveraged ETFs are terrible in typical volatile market scenarios. Link to spreadsheet: https://docs.google.com/spreadsheets/d/1XEyE4DxXOilXz4PnGBSX...

If you really really want leverage, consider having a long /ES future with suitable level of leverage, and roll quarterly. For the typical Hacker News audience who are not finance professionals, don't even think about shorting the market.

You could also just buy some long put options or a long put spread. That doesn't seem to require being a pro and is a limited loss type of play.

Hardly. Options involve a lot more strategy and tactics. Instead of trying to time the market once, you now time the market at least twice: the date you enter the trade and the chosen expiration date. When the expiration date is too close, your option could very well expire worthless before it can do anything; too far, your option has too much wasted time value, not to mention what if the market has recovered.

You also need to learn a lot about options, the Greeks, the IV, and all. With VIX in the fifties, it's very well possible for a trader to lose more money through the small stream of premiums paid for options than the market itself: the market will rebound, after all, but the premium once paid is lost forever.

I do not think options are appropriate for non-professionals.

Well, you only have to time it 1.5 times because you can always sell before expiration, although there is that upper bound. If it doesn't look like it panning out, and you called wrong, you can get out and recoup some money.

You'd have to approach it more like swing trading than buy-and-hold type strategy, unless you're aiming for something like next year.

Presumably you are in fact bearish going into the trade. If not, you probably shouldn't have traded the strategy in the first place.

Then why not write the options and capture those premiums?

You can, if you have the stomach to face occasional big losses.