For those of you new to leveraged ETFs, they are Exchange Traded Funds that multiply the exposure of the underlying index via built-in leveraging. Leveraged exposure means that the investor can potentially reap increased gains of the index OR an increased loss. In the case of the Direxion triple ETFs, the investor/trader/gambler gets 3 times the exposure.
Here are the triple ETFs that Direxion offers (US market):
|Index Covered||Ticker (Bull/Bear)
|Russell 1000 (Large Cap)||BGU/BGZ||0.95%|
|Russell Midcap Index||MWJ/MWN||0.95%|
|Russel 2000 (Small Cap)||TNA/TZA||0.95%|
|Russell 1000 Energy||ERX/ERY||0.95%|
|Russell 1000 Financial Services||FAS/FAZ||0.95%|
|MSCI US REIT Index||DRN/DRV||0.95%|
|Russell 1000 Technology Index||TYH/TYP||0.95%|
|MSCI EAFE Index||DZK/DPK||0.95%|
|MSCI Emerging Markets Index||EDC/EDZ||0.95%|
|NYSE Arca 10 Year US Treasury Index||TYD/TYO||0.95%|
|NYSE Arca 30 Year US Treasury Index||TMF/TMV||0.95%|
The volatility offered by these ETFs are enough to make even the most seasoned investor feel queasy, which is why they are the most popular with day traders. If you take a look at the chart below, you can see first hand what I mean by volatile.
FAS (Russell 1000 Financial Services 3X) Chart (click for larger image)
In this example, the ETF (FAS), has gone from a low of $11.59 in March to almost $80 in August. Quite the gain for someone willing to trade this juiced ETF. On the other side of the coin, imagine those who thought it was a trading at a discount in December, purchased @ $163.17 and ended up cutting their losses in March…. Ouch!
Remember, with any leverage, the gains and the losses are amplified and only those with the highest risk tolerance should consider trading these super leveraged ETFs.