In short: Listed as one way to be short the financials, with a warning attached: "the FAZ ETF is a levered ETF. You got to be careful" — the same rent-don't-marry decay caveat, a tactical trade at most; he prefers one-year puts.
FAZ goes up roughly three times as much as bank stocks go down, on a single day. It is the leveraged, inverse way to bet against the financial sector.
He lists it as one route for people who want that bet, and immediately attaches the warning: "it's a levered ETF, you got to be careful." The same decay problem applies as with VIXY — the fund is rebalanced daily, so in a choppy market it can lose money even if banks eventually fall. A tactical trade at most, never a hold.
His own preference for expressing the same view is a one-year put option on XLF or Bank of America: the cost is known up front, the clock is long enough for the thesis to play out, and there is no daily decay.
35:48So in the event of this, I take it there would need to also be an equity market correction. — Yes, and that's where the banks, you can buy one year puts on say Bank of America for very cheap. The FAZ ETF is a levered ETF. You got to be careful. But there's a lot of shorts on the financials that are cheap. You can buy like a one year put on the XLF, and you would only want to do this with say you have a million dollars in the market, right? And you're exposed to hard assets, you're exposed to growth stocks, whatever it is.
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