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ETFs 111: Investing in Alternatives with Exchange-Traded Funds

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1.
Inverse exchange-traded funds offer _______.
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The exact opposite return of a particular index. Thus the name 'inverse.'
2.
In order for an inverse exchange-traded fund to provide several times an index's return, it must use leveraging.
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True. Along with compounding, such a fund would use leverage to achieve its aim in a bear market.
3.
When investing in currencies via exchange-traded funds, a long position in one currency always means a _______ in another currency.
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Short position. The two positions are used in tandem.
4.
Futures-based, long-commodity exchange-traded funds work best as what kind of strategy?
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Tactical. The other terms refer to currency-oriented ETF strategies.
5.
What is a hedge-fund replication strategy?
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One that attempts to match the returns of an index of hedge funds through ETF, futures, or swap contracts. A hedge fund replication strategy takes long and short positions in ETFs, futures, and swaps to mimic the returns of a hedge fund index in an ETF or mutual fund vehicle. These strategies can provide equity-like returns with less volatility than equity indexes.