SICK vs. CURE: Direxion Rolls Out Leveraged Health Care ETFs

by on June 15, 2011 | ETFs Mentioned:

Direxion continued the expansion of its already robust lineup of leveraged and inverse ETFs on Wednesday, debuting two pairs of 3x daily products along with an inverse fund offering short exposure to an index replicated by one of the most popular U.S. equity ETFs. The latest additions to the ETF lineup include:

  • Daily Basic Materials Bull 3x Shares (MATL): This fund offers 3x daily exposure to the Materials Select Sector Index, a large cap benchmark that includes chemical manufacturers, paper companies, and firms engaged in the production of packaging products (among many other types of stocks).
  • Daily Basic Materials Bear 3x Shares (MATS): This bear counterpart to MATL seeks to deliver daily results that correspond to -300% of the daily changes in the same index [see MATS fact sheet].
  • Daily Healthcare Bull 3x Shares (CURE): This ETF will deliver daily results that correspond to 3x the daily change in the Healthcare Select Sector Index, a benchmark that includes large cap U.S. stocks engaged in the manufacture of health care equipment or providing health care-related services [see CURE fact sheet].
  • Daily Healthcare Bear 3x Shares (SICK): This fund is the bear counterpart to CURE, offering -3x exposure to the same health care benchmark [see SICK fact sheet].

“We understand that market direction matters, so we strive to offer an alternative to static investment strategies while delivering exposure to the various markets in which investors have high levels of interest, such as basic materials and healthcare,” said Direxion President Dan O’Neill.

The new products will beef up an existing suite of leveraged sector-specific ETF offerings from Direxion; the existing lineup has included 3x funds focused on agribusiness (COWL, COWS), energy (ERX, ERY), financials (FAS, FAZ), real estate (DRN, DRV), semiconductors (SOXL, SOXS), and technology (TYH, TYP). Direxion also offers pairs of 2x daily leveraged ETFs targeting some more narrow sub-sectors, including gold miners, natural gas companies, and retail firms.

The new health care and materials ETFs offer leveraged exposure to sectors of the domestic economy that have generated significant interest in non-leveraged funds. The Health & Biotech ETFdb Category contains 23 products with aggregate assets of more than $13 billion. The Materials Equities ETFdb Category includes 14 ETFs with close to $6 billion in total assets under management. MATL and MATS will be linked to the same index as the popular Materials Select Sector SPDR (XLB), while the leveraged health care ETFs offer amplified exposure to the benchmark replicated by the $4 billion XLV.

TOTS: Inverse Of VTI

Along with the set of 3x leveraged ETFs, Direxion also debuted an inverse fund linked to the MSCI US Broad Market Index. That benchmark is the same one replicated by the ultra-popular VTI, the largest ETF in the All Cap Equities ETFdb Category with almost $20 billion in assets. The Direxion Total Market Bear 1x Shares (TOTS) will seek to deliver daily returns that correspond to the inverse of the broad-based benchmark that contains more than 3,000 U.S. stocks [see VTI holdings].

TOTS could have appeal for investors looking to establish a broad hedge against U.S. equities or short position in the U.S. stock market. According to the ETF screener, there are inverse ETFs offering exposure to a number of broad U.S. equity benchmarks, including the S&P 500 (SH), Russell 2000 (RWM), Dow Jones Industrial Average (DOG), S&P SmallCap 600 (SBB), and MidCap 400 (MYY).

The launch of TOTS marks the first -1x equity ETF from Direxion; earlier this year the company debuted three inverse bond ETFs, including products focusing on intermediate term Treasuries (TYNS), long-dated Treasuries (TYBS), and the broad investment grade bond market (SAGG).

YINN and YANG

Direxion also announced on Wednesday that the ticker symbols for the pair of ETF offering 3x and -3x daily exposure to the BNY Mellon China Select ADR Index would change. The bull fund is now YINN (previously CZM) while the bear counterpart becomes YANG (previously CZI).

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Disclosure: No positions at time of writing.