What is Short ETF?

Definition

A short ETF, also known as an inverse ETF, is designed to increase in value when its benchmark decreases in value. This is achieved through the use of short-selling, futures contracts, and other derivatives that enable the investment to move in the opposite direction to its benchmark. For instance, if the FTSE 100 rises in value, an inverse ETF that tracks the FTSE will decrease in value, and vice versa. Investing in a short ETF involves going short, but with limited loss potential, as the maximum loss is equal to the amount invested in the ETF.