Health care stocks and ETFs are in the spotlight ahead of the
U.S. Supreme Court's ruling on the Affordable Care Act, expected
on Thursday. The court is likely to hand down one of three
outcomes: keep Obamacare intact as-is, rule the individual
mandate unconstitutional - thereby striking down the overall law
itself - or rule against the individual mandate while upholding
the rest of the law.
Traders have multiple ways to play these possible outcomes
beyond traditional long ETFs such as the Health Care Select
Sector SPDR (NYSE:
) and the iShares Dow Jones U.S. Medical Devices Index Fund
Those with a taste for adventure should consider the following
leveraged ETFs ahead of and after the Obamacare ruling.
ProShares UltraShort Health Care (NYSE:
The ProShares UltraShort Health Care ETF seeks to deliver
twice the inverse daily performance of the Dow Jones U.S. Health
Care Index. That index is tracked by the iShares Dow Jones U.S.
Healthcare Sector Index Fund (NYSE:
), so those that are long RXD ahead of and into the Obamacare
ruling will want to be tracking the action in stocks such as Dow
components Johnson & Johnson (NYSE:
) and Pfizer (NYSE:
Traders with long positions in an ETF such as RXD - or short
individual pharmaceuticals names - should cheer for the
individual mandate to be struck down, but for the rest of
Obamacare to be upheld. S&P Capital IQ said in a research
note that this scenario
managed care providers, pharmaceuticals makers, health care
facilities operators and health care services providers.
The ProShares Ultra Health Care ETF (NYSE:
) is RXD's bullish equivalent. As of the close of U.S. markets on
June 25, Johnson & Johnson, Pfizer and Merck (NYSE:
) accounted for about 30% of RXD's weight.
Direxion Daily Healthcare Bull 3X Shares (NYSE:
Give Direxion, the second-largest issuer of inverse and
leveraged ETFs, credit for raising awareness of CURE
ahead of Thursday's ruling
"If the Affordable Care Law stands: The Congressional Budget
Office ('CBO') says health insurance companies will have 32
million more customers. Insurers would benefit from the new
insurance marketplaces or exchanges that states would have to set
up for individuals shopping for insurance," Direxion said in the
On the other hand, if the individual mandate is revoked but
the rest of the law is upheld, Direxion said the following
"If the court repeals the mandate as well as provisions
requiring non-discriminatory coverage for people with
pre-existing conditions, that could be a boon for insurance
companies, since the federal government would still provide tens
of billions of subsidies for people to buy insurance."
Direxion Daily Healthcare Bear 3X Shares (NYSE:
SICK is CURE's bearish cousin. This fund could benefit even if
the individual mandate is struck down and the rest of Obamacare
is upheld. In Direxion's note, the company stated that, "if that
happens, it may not last long because Congress would likely
quickly act to repeal the subsidies."
Both CURE and SICK track the S&P Health Care Select Sector
Index, the same index used by the Health Care Select Sector
For more on Obamacare trading ideas, click
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