Asset Allocation Summit: Opportunities in Direxion’s Leveraged-Inverse Suite

During an Asset Allocation Summit session hosted by TMX VettaFi Head of Research Todd Rosenbluth, these leveraged-inverse opportunities were highlighted with Edward Egilinsky, Direxion’s managing director, head of global sales/distribution & alternatives. The session with Direxion was part of a broader discussion regarding derivatives-based strategies.

To achieve the leveraged and inverse exposure these products provide, investments in derivatives like futures contracts and swaps is necessary. Due to the complex nature of how these products operate, Egilinsky is quick to stress the importance of education.

“I think the key is education with Direxion when it comes to leveraged and inverse,” emphasized Egilinsky.

See More: Direxion Launches Single-Stock ETFs for ASML, BABA, MRVL, and SOFI

Direxion has been front and center of the explosion in leveraged-inverse ETFs. As Egilinsky noted, the firm has been pioneering this corner of the ETF marketplace since 2008, whether it’s to get sector-specific or more concentrated exposure via single ETFs.

Single-stock funds, in particular, have exploded in popularity among traders. They allow for the potential of magnified profits with their additional leverage, or to hedge against a bullish position or simply take a bearish bet. Single-stock ETFs are ideal for event-driven traders looking to capitalize on short-term moves due to earnings releases or other stock-specific news.

“If somebody wants to express a bullish view with leverage, the one advantage with an ETF is that there’s no margin necessary,” Egilinsky said, noting that traders don’t have to use a margin account to achieve the level of exposure these products provide.

With that, some of their more offerings for traders concentrates on tech names witnessing heavy volume:

• Micron: Direxion’s Daily MU Bull 2X Shares (MUU ) / Direxion Daily MU Bear 1X Shares (MUD )
• Tesla (as Egilinsky noted, this is one of the more popular offerings): Direxion Daily TSLA Bull 2X Shares (TSLL A-) / Direxion Daily TSLA Bear 1X Shares (TSLS )
• Nvidia: Direxion Daily NVDA Bull 2X Shares (NVDU A-) / Direxion Daily NVDA Bear 1X Shares (NVDD A-)
• Palantir: Direxion Daily PLTR Bull 2x Shares (PLTU ) / Daily Direxion PLTR Bear 1X Shares (PLTD )

As far as which are more popular, bull or bear, Egilinsky noted both. It all depends on how traders’ read the pulse of the markets.

“We’ve seen a pickup in inverse products with markets at highs,” he said. “However, when you look at the leveraged-inverse space, its preponderance is leveraged bullishness.”

Direxion’s products aren’t just for traders. They also have an equal weight strategy for long-term investors looking to evenly disperse their allocation to the Nasdaq 100, with the Direxion NASDAQ-100 Equal Weighted Index ETF (QQQE B-).

“We have QQQE for those who believe if this market’s ever going to broaden out in breadth,” Egilinsky said. “That’s something where you could utilize advisors as diversification within your large-cap core.”

See More: Is SoFi Technologies Ripe for a Leveraged Relief Rally?

Given the profit-making potential that the leveraged-inverse suite can bring, it’s easy to get enamored by these products. However, magnified gains also means magnified losses. This is especially the case if traders or tactical long-term investors don’t know what’s lurking underneath the proverbial hood of these products.

This is where the discussion came full circle — education is an imperative component for understanding how these products work.

“You need to do your homework and know what’s under the hood no matter what type of derivative you’re considering to invest in,” said Egilinsky, noting that Direxion’s products are “high-risk, high-reward.”

For those who would like to learn more about these tactical tools for the market, visit Direxion’s education center.

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