Leveraged and inverse products have given investors access to an investment space that was typically relegated to only high-net worth individuals or institutions. With the transparency and liquidity of an ETF wrapper that incorporates multiple hedge fund strategies, these ETFs open up the arena to all types of investors irrespective of net worth.
“I like to think that we’ve democratized leverage so that RAs and family offices that can’t have access to the tools that hedge funds do–they don’t have prime brokerage accounts, they don’t trade options, they might be constrained by certain things–have this opportunity to generate those types of gains and hedge,” Sylvia Jablonski, Direxion Managing Director, Capital Markets – Institutional ETF Strategist, told ETF Trends at Inside ETFs.
Jablonski cites education as a prime catalyst for investors no longer buying and holding the short-term trading products and rather, using them for what they’re intended to do. With Direxion’s expansive library of education materials at investors’ disposal, it can provide them with the confidence to trade tactically with the big players like institutional investors.
With the return of volatile markets, traders can now implement what they’ve learned thus far.
“Now, with volatility, we’re really happy actually to see that traders are going in and out,” said Jablonski. “They’re going into the bull fund when we see a rally for a couple of days and then they’re going right back into the bear fund when the markets turn. I think that education has really driven the point home that there are short-term, tactical trading tools and investors seem to get it.”
For traders wanting to get in on the leveraged-inverse action, here are five of the best-performing thus far year-to-date (YTD) as of close of trading April 26, 2019:
1. VelocityShares 3x Lng Crude Oil ETN New (UWT ) – up 153.82%
UWT seeks to replicate three times of the S&P GSCI® Crude Oil Index ER. The index tracks a hypothetical position in the nearest-to-expiration NYMEX light sweet crude oil futures contract, which is rolled each month into the futures contract expiring in the next month. The value of the index fluctuates with changes in the price of the relevant NYMEX light sweet crude oil futures contracts.
2. United States 3x Oil (USOU ) – up 152.52%
USOU seeks the daily changes in percentage terms of its shares’ per share NAV to reflect three times the daily change in percentage terms of the price of a specified short-term futures contract on light, sweet crude oil. USCF will endeavor to have the notional value of the fund’s aggregate exposure to the Benchmark Oil Futures Contract at the close of each trading day approximately equal to 300% of the fund’s NAV. The Benchmark Oil Futures Contract is the futures contract on light, sweet crude oil as traded on the NYMEX, traded under the trading symbol “CL.”
3. UBS ETRACS ProShares Dly 3x Lng Crud ETN (WTIU ) – up 152.00%
With WTIU, the 3X long securities provide a daily long leveraged exposure to the performance of the Bloomberg WTI Crude Oil Subindex ERSM. The index is designed to measure the return from a rolling long position in WTI crude oil futures contracts that trade on major U.S. exchanges.
4. ProShares UltraPro 3x Crude Oil ETF (OILU ) – up 151.00%
OILU seeks to return a multiple (3x) of the performance of the Bloomberg WTI Crude Oil Subindex for a single day. The fund seeks to meet its investment objective by investing, under normal market conditions, in futures contracts for WTI sweet, light crude oil listed on the NYMEX, ICE Futures U.S. or other U.S. exchanges and listed options on such contracts.
5. Direxion Daily Semiconductor Bull 3X ETF (SOXL ) –up 128.05%
SOXL seeks daily investment results, before fees and expenses, of 300% of the daily performance of the PHLX Semiconductor Sector Index. The index measures the performance of domestic companies engaged in the design, distribution, manufacture and sale of semiconductors.
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