Direxion has taken its trendy triple-leveraged exchange traded funds (ETFs) abroad and cross-listed them on the NYSE Euronext’s Amsterdam market.
Andy O’Rourke, Marketing Director of Direxion says that this move by Direxion to cross-list 6 of its very popular and highly liquid ETFs across the ocean has been seen by prominent fund provider as the most convenient method to make these funds available in Amsterdam, but it is not a full-fledged move to establish an open shop in Europe.
Triple ETF List
For investors who are new to this industry sector, Direxion is the very first company that offers ETFs which possess a targeted return that is leveraged up to 3 times as well as minus 3 times that of its underlying indices. To date, the highest successes are the large cap 3x bull (BGU), in addition to the large cap -3x bear (BGZ) ETFs that are based on the Russell 1000 index. Also proving popular are The small cap 3x bull (TNA), along with the small cap -3x bear (TZA) ETFs that similarly follow the Russell 2000 index, are equally proving quite popular.
However, sector ETFs have taken a much slower start. Included among these are the large cap 3x bull (FAS) as well as the large cap -3x bear (FAZ) that are based on the Russell 1000 financial services index, whereas the large cap 3x bull (ERX), along with the large cap bear (ERY) that are similarly based on the Russell 1000 energy index.
Some past results indicate that these ETFs may be compared to advanced weaponry when comparing their volatility to it. As per one set of results, the average change noticed in the above mentioned 8 ETFs was a difference of 25% from close of the previous day. Thus, ERY closed at 52.44 points. Whereby, not only did this ETF lose 28.48 points, its intra-day range for the day was 35.06 points. Under these circumstances, it lost 10 points. As such, it is obvious that these powerfully charged ETFs will not suit every investor. Only the most serious and determined investors will be comfortable by investing their funds in the Direxion ETFs, the simple presumption that ‘it may turn back’ can easily convert a minor 5% loss into a more devastating 20% loss in no time. On the other hand, though quite ironical, but the high volatility inherent in these ETFs, can conveniently force an investor to quickly adopt very high trading disciplines.
Retail investor may want to make an attempt at these volatile ETFs, but they should be clearly warned that there could some setbacks. For similar reasons, it is anticipated that investors who are currently engaged in the day trading options of hedge funds may find these ETFs and some of the risks involved therein not too inconvenient, particularly when its liquidity and volumes start to get better. In today’s de leveraged environment, this may be a way to get stocked up on the ‘off balance sheet leverage’ in order to get the extra gains without committing for the extra margin.