Nightmare days on the Italian Stock Exchange weighed down by political risk deriving from the desire of the main Italian parties to quickly find an agreement on the electoral law to bring forward the date of the elections to next autumn. Concerns also exacerbated by the voting system chosen by the political forces, i.e. a law based on the German model which once again paves the way for a proportional mechanism which will make the path of reform even more difficult due to the impossibility for any party to being able to govern alone, having to resort to coalitions on the contrary. Not only that, because if there really is a vote next autumn, the risk is that of not having a government that prepares and gets the budget law approved, creating a de facto political vacuum of a few months that will expose the country to the risk of financial speculation.
The Milan Stock Exchange is therefore tinged with an intense red (-2,11%), with generalized losses that reach higher percentages hour by hour and, as per tradition in these cases, mainly affect the banks.
But it is said that when the Stock Exchanges travel downwards they are all losers, quite the contrary. There are those who manage to earn very large sums on these losses, betting precisely on the fall of the markets and thus managing to profit from what happens in crisis situations.
SHORT ETF: YOU EARN WHEN THE STOCK LOSES
Short ETFs they are financial instruments that replicate the market trend, but in reverse, thus allowing investors to obtain profits even in bearish market situations. Obviously their use is not for everyone, but they are products reserved for professionals only.
Using a practical example to illustrate how they work, if the Ftse Mib yields 1% whoever buys an ETF whose underlying is the performance of the Italian stock exchange will find himself in possession of a security that rises by approximately 1%, earning thanks to the losses of the Milan Stock Exchange.
Taking as an example what is happening on the markets today, the FtseMib is currently down 2,11%, while the Lyxor Ucits Etf Ftse Mib Daily Sht Bear, i.e. the structured ETF managed by Société Générale which is based on the main Milanese stock exchange, rises of 1,99%.
SHORT LEVERAGED ETFs
The same mechanism, but even more amplified, is followed by Leveraged ETFs, real derivative products which, by exploiting the leverage effect, are able to earn much more than the stock market loses, almost double that. Moving again from the general to the particular, with the Ftse Mib down by 2,1%, the Lyxor Ucits Etf Ftse Mib Dai Dou Sht Xbr rises by 3,97%.
UNRELATED SECURITIES
When the market is bearish and the various titles travel at a loss, it sometimes happens to see that "someone is saved", a few white flies who manage to earn when the rest of the list falls. The reason behind their trend is the little or no correlation between these securities and the underlying causes of the market decline. Example: the stock market is down due to the risk of a political void, gaining today is a stock like Brembo (+1,06%) which has also performed strongly in recent months and is fairly immune to what is happening in Italy because it most of its turnover abroad.
TIPS FOR SHOPPING
There is also another aspect that investors need to consider when stocks are running in the red. These situations indeed become the best for buy the shares of the healthiest companies at an excellent price which, after the turbulence, thanks to their fundamentals, will probably be able to recover the ground lost along the way.
In these cases, before choosing which shares to focus on, it is better to take a look at certain parameters such as price earnings, roe, dividends, any debts. In case the company is healthy, you can take the opportunity to buy at a discounted price. But it's always better to avoid do-it-yourself and rely on professional financial advisors, possibly without conflicts of interest.
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