Typical investors have no way to easily and cheaply trade foreign currency markets, let alone short a currency. Fortunately, there are ETFs listed on U.S. stock exchanges that track foreign exchange movements both long and short.

The ProShares UltraShort Euro (EUO ) is one way for an investor to gain short exposure to the euro. Such an exposure may be profitable for someone betting that the euro will continue its recent decline.

The euro currency has seen increased price volatility in the past few months. The European Central Bank is attempting to initiate quantitative easing in order to stabilize Europe’s shaky economy, the Swiss National Bank de-pegged the Swiss Franc from the euro, and a new Greek government is threatening to finally exit the eurozone. All of this, plus persistent economic woes in the peripheral eurozone countries has caused the euro to lose value at a rapid rate.

ProShares UltraShort Euro ETF

Using a leveraged ETF is a convenient way for individual investors to gain short exposure to the euro. The ETF is a short exposure via the ETF and not a short position in and of itself. This offers a number of benefits including limited downside loss. One can only lose their investment and no more if the shares drop to zero, while a short has a theoretically infinite loss potential. Another is that certain investors are restricted from shorting financial instruments. Additionally, these shares can be bought outright without the need for margin. (See also: Guide To ETF Providers: ProShares )

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According to its prospectus. the ProShares UltraShort Euro ETF seeks daily investment results, before fees and expenses, that correspond to two times the inverse (-2x) of the daily performance of the U.S. Dollar price of the euro. This means that for every 1% loss in the spot EUR:USD market, the ETF should return a positive 2% and vice-versa. Gains will be magnified, but losses will also be exaggerated.

Not only is the EUO a short instrument, it is also a leveraged ETF allowing for its double inverse return characteristics. These leveraged ETFs are also referred to as geared investments. Most geared funds have one-day investment objectives: They aim to provide a multiple (such as 2x or -2x) of the return of its benchmark for a single day. For any period of time other than a day, the performance of a leveraged ETF is not likely to equal the benchmark return times the multiple stated in its one day return objective. This is due to the compounding of daily returns, and the effects are magnified for geared or leveraged funds. (For more, see: Dissecting Leveraged ETFs .)

EUO has performed exceptionally well this year due to the drop in the euro price. The ETF has returned nearly 14% year-to-date and almost 39% over the past 12 months. Meanwhile the EUR:USD currency pair has lost 5.1% year-to-date, falling from nearly 1.21 at the start of the year to just under 1.13. The euro had traded as high as 1.3931 dollars per euro during 2014.

Aside from the ProShares double inverse offering above, there are other long and short euro ETFs and ETNs traded on U.S. markets:

Market Vectors Double Short Euro ETN (DRR ): seeks a -2x return

ProShares Short Euro ETF (EUFX ): seeks a -1x return

Guggenheim CurrencyShares Euro ETF (FXE ): seeks a +1x return

ProShares Ultra Euro ETF (ULE ): seeks a +2x return

The Bottom Line

An investor who believes that the euro will continue to fall in value against the U.S. dollar can gain short exposure to the euro through the ProShares UltraShort Euro ETF. Because it is a leveraged ETF, for every percentage the euro drops, this ETF will gain 2%, and the reverse will occur if the euro strengthens. This leverage, or gearing. magnifies both gains and losses for shareholders. There are a number of alternative ETFs that give various other exposures to the EUR:USD pair for traders and investors seeking -1x, +1x and +2x returns.