The idea behind shorting equities is to profit when their prices are falling. Since markets tend to rise historically, you need to pick your spots for shorting carefully. The challenge, of course, is to know when to short -- and when to cover that short. 

I recently notched double-digit percentage gains by taking a short position in financial stocks through the ProShares UltraShort Financials (SKF). This ETF is designed to profit twice as fast as the declining value of the Dow Jones U.S. Financial Index falls.

The power of leverage in a fast-moving market can help to boost gains quickly. Of course, the flipside to this leverage is that an investor can absorb losses equally as fast when the market’s direction goes against expectations.

The short-term direction of this market right now is highly uncertain, and highly volatile. Fears surrounding Greece’s debt crisis and the possibility of its spread throughout the eurozone to other deficit-running countries have made markets very jittery. Those fears became more intense after the Bank of Spain bailed out a small regional bank, raising concerns of a systematic crash, much like we saw in 2008 after the Lehman Brothers collapse.

In light of these developments, I made a decision on May 10 to take a position in SKF. I recommended SKF in my ETF Trader service, and I then advised my subscribers to sell the position just two weeks later on May 21, booking profits of more than 16%. I still don’t think this sector’s problems are over, but I certainly did not want to let a double-digit percentage gain in just a couple of weeks slip away. I suspect we’ll see more downside in financials in the coming weeks, and that could mean additional gains for SKF. 

If you want my advice about buying and selling specific ETFs, or if you’re open to the potential of booking 16% gains in two weeks, then I invite you to check out my ETF Trader advisory service.