ETF Watch: Strategy Shares Plans Contrarian Fund

A recent filing from Strategy Shares outlines the firm’s plans to launch an ETF that will seek to invest in stocks that could face a short squeeze that will cause the price to spike. The Active Alts Contrarian ETF (SQZZ) will be actively managed and list on the Nasdaq stock exchange.

A short squeeze occurs when a shorted stock sees a price increase and the holders of short positions need to cover their positions or buy them back. That can cause a sort of snowball effect in which more shares are pulled off the market, further driving up the price, according to the prospectus.

The fund will be managed by subadvisor Active Alts Inc. The firm will use fundamental and technical analysis to identify stocks that have been overly shorted. It will also seek to earn premium income by lending out short-squeeze candidates to short-sellers.

Eligible issuers are limited to a weight of 5% within the index, and components must have at least $250 million in market capitalization. The prospectus noted that the fund could have an annual turnover of more than 100%.

The filing did not include an expense ratio.

Contact Heather Bell at [email protected].