Now that Lehman Brothers (NYSE:LEH) is a penny stock, and Merrill Lynch (NYSE:MER) has apparently embraced a bear hug from Bank of America (NYSE:BAC), it's clear even to people who don't usually follow the markets that Wall Street is in turmoil.

For a year and a half, investors wanting to bet on continued problems in the financial industry have used the UltraShort Financials ProShares ETF (SKF). So far, that bet has been highly rewarding; the shares have returned 65% over the past year.

Fund facts
Inception date: Jan. 30, 2007
Expense ratio: 0.95%
Net assets: $4.2 billion

Fund specifics
As one of many ProShares UltraShort ETFs, the fund invests in assets that return an amount equal to two times the inverse of its tracking index. So if the particular index falls by 5% on a given day, the ETF should rise by twice that, or 10%. For the UltraShort Financials ETF, the index used is the Dow Jones U.S. Financials Index. This index measures the performance of the financial-services sector, with top holdings including JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), and Wells Fargo (NYSE:WFC).

Portfolio fit?
Over the past year, financials have been on a roller-coaster ride, with a seemingly neverending string of bad news, bankruptcies, and takeovers. The financial crisis may soon reach a climax, but the road ahead for this sector will likely be extremely volatile for some time.

Despite the large gains of the UltraShort Financial ETF in the past year, an investment in a fund which shorts the financial sector could be a big mistake for investors who cannot withstand the potential loss of a significant portion of their principal. On the other hand, if more financial firms keep struggling, and see even more losses in their share values, this fund should continue its winning ways.

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Fool contributor Zoe Van Schyndel lives in the Seattle area where she enjoys the coffee and natural wonders. She does not own any of the funds or securities mentioned in this article. JPMorgan Chase and Bank of America are Motley Fool Income Investor recommendations. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.