Douglas Yones on Direxion's Lineup & ETF Education at Exchange

Nick Wodehsick: This U.S. market sell-off has proven to be difficult for many traditional equity strategies out there, but all this volatility could very well work in favor of Direxion’s leveraged & inverse ETFs. Leveraged and inverse ETFs intrinsically play into market trends. Do you think there’s any trends that investors should be keeping an eye out for in the coming months? 

Douglas Yones: You’re absolutely right. If we look at 2025, I think we’ve had more 1%-market-move days this year than multiple years combined. I look at this space and say, hey, 2025 is Direxion weather.

For momentum traders, swing traders, or short-term investors who want to express a view, you’ve probably never had a better market to attempt to take advantage of market swings than what we’re in right now. The lineup of Direxion ETFs, aside from QQQE, which is the equal-weight Q’s, COM, which is long-flat commodities, and HCMT, the majority of our lineup right now is leveraged and inverse ETFs, offering both bull and bear exposure to the markets.

For short-term traders, you have multiple headline-moving days in different sectors in different parts of the economy, whether it be homebuilders with tariffs, whether it be China, whether it be AI, or what’s going on in the semiconductor sector, and all the news around Nvidia, right?

These are market-moving headlines, and these securities are moving very quickly. For momentum traders and short-term traders who really love risk, these are the markets they’re looking for. And so, it’s been a pretty exciting time at Direxion.

Wodeshick: This is certainly an opportune time to be considering leveraged and inverse ETFs. But are there any of nonleveraged funds you think investors should be taking a look at?

Yones: I briefly mentioned QQQE — that’s our nonleveraged equal-weight Nasdaq 100 ETF that’s more of a buy -and-hold investment. We’ve seen quite a bit of influencers and economists come out and say that given the moves away from some of the biggest large-cap names there, the rotation into the rest of the market tends to be really good for nonmarket-cap-weighted ETFs in that space.

Generally speaking, I would say, for an investor who’s thinking about the Nasdaq-100, they’re thinking about that side of the marketplace not being in a market-cap-dominated ETF, where the top 10 names are the majority of your holding. They may be looking to spread their investment out beyond the top few names, which is effectively most of the Mag Seven. Instead, they’re looking to actually pick up some of the growth that’s happening beyond those names. This could be the year where we see some outperformance there. 

Wodeshick: While now may be an excellent time to use leveraged & inverse ETFs, some investors and advisors might still be wary of how to pilot these sorts of investments. What do you say to those who want to take these ETFs on but are still concerned about the risk? 

Yones: I’m actually glad if that’s the starting point for them, because the very first thing they should do is become educated. Leveraged and inverse ETFs are for risk lovers who watch their positions constantly. There are a lot of resources available to learn how leveraged and inverse ETFs work, whether it be through the VettaFi channel or on our own website, Direxion.com.

We have an online university where you can go in and take a course for free. It doesn’t take that long, and it’ll walk you through and teach you exactly how leverage magnifies both returns to the positive side and returns to the negative side.

For anyone out there who’s looking at leveraged and inverse ETFs, they should realize they have to first get educated and understand exactly how they work. Just come to our website! It is time well-spent.

Just remember, we put the word “daily” in our ETF titles for a reason; it’s not by accident. The funds seek a daily goal and reset their exposure every day. That means you need to look at these positions daily. Do you need to trade every day? That’s up to you, based on leverage points, based on your expectations, and the market. But you do need to look at these every day.

And so again, for someone who’s looking for buy-and-hold, leveraged ETFs aren’t the right place for them to look. They can look at QQQE or any of our other ETFs. But for those starting to think about, hey, I’m looking at the markets, and I might want to take advantage of some of these opportunities with leverage, come get educated. Then go and look at that position every day and make sure you’re still comfortable with the amount of leverage you’re taking on.

Wodeshick: When leveraged and inverse ETFs came to market at first, some investors were uncertain regarding how they operate. Nowaday, Direxion’s done an excellent job at advancing education for these funds. Do you feel more confident that the investing public has a better understanding as to how these funds work?

Yones: Obviously, we’ve seen quite a bit of adoption in the space over 16 years, as more and more traders utilize them, hence why we see more ETFs being launched and also why we see more assets coming into the space. I think something like 8%-10% of the total AUM in the ETF industry is now in the leverage and inverse space. So, we know there’s a greater adoption rate.

What I think has been more interesting to me is that the archetype of the investor has changed. Meaning, yes, we have retail investors interested in momentum trading. We’re seeing a lot of institutional traders. We’re seeing a lot of RIAs who may have an SMA sleeve that’s very aggressive for a certain type of client. A lot of the institutional traders are starting to utilize these ETFs more and more. 

We probably don’t talk enough about the inverse products. That’s because a lot of times people assume an inverse bet is built for someone trying to trade to the negative. They’re forgetting that they’re also built as a way to hedge positions. I’ll give you a good example of this. Berkshire Hathaway and Nvidia — a lot of investors and institutions have held these securities for a very long time. They have had an unbelievable amount of growth over the last five to 10 years.

Now, you start to see volatility in that name, and they think, oh, I wouldn’t mind paring down my position. I’d like to take some risks off the table. If I sell, I may have a big capital gain, and that could be a big tax bite. What better way to actually remove some of their exposure but without having to sell? I can buy the Berkshire Hathaway inverse ETF, BRKD, and hedge some of my exposure to the stock. The same could be done with Nvidia. I’m not taking the tax hit, but I am hedging my position.

That’s something we probably don’t talk enough about, because in the last 10 years, markets did nothing but go up. Now that they are not just going up, I think the inverse ETFs should be on people’s radars. Yes, some people use them for short-term trading. Keep in mind, true traders think bidirectionally. 

Wodeshick: Now, we’re currently chatting in the middle of VettaFi’s 2025 Exchange Conference. What’s been your favorite aspect of the conference thus far? 

Yones: It’s amazing that, year after year, VettaFi is able to get all the decision-makers, the influencers, the strategists, the people who are both making the ETF industry and world happen every day, and those same people are shaping the industry for the next three to five years and beyond. VettaFi gets them all in one place.

There are fantastic sessions, and you can go listen to these amazing speakers. Some of the side conversations also have amazing speakers and fantastic sessions. And so, there’s a value-add of being able to come to one place and see and hear from everyone, and find out what’s going on in every segment of the market. What are people working on? What are the new innovations? Where is it going to come from? Where’s growth happening? What are the concerns out there? What are the risks, and what do we worry about?

It’s all happening in one spot over a couple of days. It’s hard to sleep as a result of that. But you know, there’s no better place to be than here with the VettaFi team.

For more news, information, and analysis, visit the Leveraged & Inverse Channel.