With market volatility coiled and ready to explode at any moment due to heightened tensions from the U.S. trade beef with China, Brexit negotiations, an all-time high in stocks, and looming global uncertainty and political unrest, savvy investors are looking for ways to both capitalize on any impending increased market movement, and also hedge existing portfolios against potential market declines. Leveraged ETFs are one of the tools that serve investors with these goals quite well.
A leveraged exchange-traded fund is a type of marketable security that uses financial derivatives such as options contracts, futures, margin accounts, and debt to boost the returns of an underlying index. While a traditional ETF typically follows the securities in its underlying index on a one-to-one basis, a leveraged ETF may aim for a 2:1 or 3:1 ratio. These ETFs can be designed for both short and long trades, so investors can access the upside and downside of market activity.
Direxion offer leveraged ETFs for investors who want the chance to do short-term trading on the upside or downside of markets.
Its Financial Bull and Bear 3X ETFs seek a return that is 300% of the performance of the Russell 1000 Financial Services index for a single day. The financial index holdings include names such as Berkshire Hathaway, JP Morgan Chase, Visa and Bank of America. The index sector weightings include banks, equity real estate investment trusts, IT services and capital markets.
Learn more about FAS and FAZ in this Direxion video:
Direxion Daily Financial Bull 3X Shares (FAS )
The Direxion Daily Financial Bull 3X Shares seeks daily investment results, before fees and expenses, of 300% of the performance of the Russell 1000 Financial Services Index. There is no guarantee the funds will meet their stated investment objective. This leveraged ETF pursues a return that is 300% of the return of its benchmark index for a single day. The funds should not be expected to provide three times the return of the benchmark’s cumulative return for periods greater than a day.
Direxion Daily Financial Bear 3X Shares (FAZ )
The Direxion Daily Financial Bear 3X Shares seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite), of the performance of the Russell 1000 Financial Services Index. There is no guarantee the funds will meet their stated investment objective. This leveraged ETF pursues a return that is -300% of the return of its benchmark index for a single day. The fund should not be expected to provide negative three times the return of the benchmark’s cumulative return for periods greater than a day.
The Russell 1000® Financial Services Index (RGUSFLA) is a subset of the Russell 1000® Index that measures the performance of the securities classified in the financial services sector of the large-capitalization U.S. equity market. One cannot directly invest in an index, which is why using an ETF like FAZ makes sense for qualified investors. The fund has a 1% expense ratio and is for investors who are well-versed in the risks of leverage and are able to adapt to changing market conditions accordingly.
This article originally appeared on ETFTrends.com.
