ETF to Hedge More Weakness

The late afternoon action in the market is sending the $SPY to the lows of the session and I do not like the short-term action. This has led me to consider adding a new ETF to my client's portfolios in the next two days to hedge against further weakness in equities.

The AdvisorShares Active Bear ETF ($HDGE) is an actively managed ETF that shorts stocks and other ETFs based on proprietary research. Since 4/29/11 the $SPY is down 15.5% and $HDGE is up 26%.

To look at it from a different perspective, $HDGE was down 13% from 1/27/11 through 5/12/11. The ETF began trading on 1/27/11. During that same time frame the $SPY was up 4%.

What this tells me is that when you are right in the trend call $HDGE will do you good. If you are wrong the ETF will likely under perform dramatically.

What if the trend remains in the trading range that I highlighted earlier today?? Since 8/18/11 the $SPY is up 0.5% and $HDGE is down 0.4%. Non-movement from both.

If you agree there could be more downside and would like to hedge a portfolio with equity exposure then $HDGE could be an option. But definitely not a long-term investment.

Some facts: the expense ratio is a high 1.85%, as of yesterday its top short positions were $CTCT, $MHK, $MDSO, $KITD, and $FOSL. Also, it trades about 200,000 shares per day on average.

ALSO - PFG currently does not have a position in $HDGE