Many inverse ETFs utilize daily futures contracts to produce their returns. A futures contract is a contract to buy or sell an asset or security at a set time and price. Futures allow investors to make a bet on the direction of a securities price.

Inverse ETFs' use of derivatives—like futures contracts—allows investors to make a bet that the market will decline. If the market falls, the inverse ETF rises by roughly the same percentage minus fees and commissions from the broker.

• An inverse ETF is an exchange traded fund (ETF) constructed by using various derivatives to profit from a decline in the value of an underlying benchmark.
• Inverse ETFs allow investors to make money when the market or the underlying index declines, but without having to sell anything...