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Wall Street bulls have roared higher in November powered by positive trade development between United States and China, easing monetary policies and better-than-expected earnings.
In fact, the three major bourses logged in the best monthly gains since June with the S&P 500 and Dow Jones gaining 3.4% and 3.7%, respectively, and Nasdaq climbing 4.5%. Further, the holiday season fervor has added to the overall strength.
The bullish combinations have resulted in huge demand for leveraged ETFs as investors seek to register big gains in a short span. Leveraged funds provide multiple exposure (i.e. 2x or 3x) to the daily performance of the underlying index by employing various investment strategies such as swaps, futures contracts and other derivative instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time, provided the trend remains a friend.
Below we have highlighted five best leveraged ETFs of November.
This fund creates a 3x leveraged long position on the S&P Biotechnology Select Industry Index. It charges an annual fee of 95 basis points (bps) and trades in a heavy average daily volume of about 2.2 million shares. The fund has AUM of $530 million (read: Biotech Tops in November: Best ETFs & Stocks).
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 20%
This note seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 bps in annual fees. The ETN has accumulated $154.7 million in its asset base and trades in average daily volume of 134,000 shares.
This fund creates three times leveraged long position in the Health Care Select Sector Index while charging 95 bps in fees a year. It has $153.8 million in AUM and trades in volumes of 72,000 shares on average.
MicroSectors U.S. Big Banks Index 3X Leveraged ETN (BNKU - Free Report) – Up 14.8%
BNKU seeks to provide three times exposure to the Solactive MicroSectors U.S. Big Banks Index. The ETN has accumulated $37.1 million in its asset base. It charges 95 bps in annual fees and trades in average daily volume of under 1,000 shares (read: Leveraged ETFs That Are Up 25% Plus at Halfway Q4).
This ETF targets the technology sector with three times exposure to the Technology Select Sector Index. It has amassed about $868.2 million in its asset base and charges 95 bps in fees per year. Volume is good as it exchanges more than 288,000 shares a day on average.
Bottom Line
While this strategy is highly beneficial for short-term traders, it could lead to huge losses compared to traditional funds in fluctuating or seesawing markets. Further, the performance of the ETFs could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as, weeks or months) due to their compounding effect (see: all the Leveraged Equity ETFs here).
Still, for ETF investors who are bullish on equities for the near term, any of the above products could make an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance, and a belief that the “trend is the friend” in this corner of the investing world.
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5 Top-Performing Leveraged ETFs of November
Wall Street bulls have roared higher in November powered by positive trade development between United States and China, easing monetary policies and better-than-expected earnings.
In fact, the three major bourses logged in the best monthly gains since June with the S&P 500 and Dow Jones gaining 3.4% and 3.7%, respectively, and Nasdaq climbing 4.5%. Further, the holiday season fervor has added to the overall strength.
The bullish combinations have resulted in huge demand for leveraged ETFs as investors seek to register big gains in a short span. Leveraged funds provide multiple exposure (i.e. 2x or 3x) to the daily performance of the underlying index by employing various investment strategies such as swaps, futures contracts and other derivative instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time, provided the trend remains a friend.
Below we have highlighted five best leveraged ETFs of November.
Direxion Daily S&P Biotech Bull 3x Shares (LABU - Free Report) – Up 37.9%
This fund creates a 3x leveraged long position on the S&P Biotechnology Select Industry Index. It charges an annual fee of 95 basis points (bps) and trades in a heavy average daily volume of about 2.2 million shares. The fund has AUM of $530 million (read: Biotech Tops in November: Best ETFs & Stocks).
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 20%
This note seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 bps in annual fees. The ETN has accumulated $154.7 million in its asset base and trades in average daily volume of 134,000 shares.
Direxion Daily Healthcare Bull 3X Shares (CURE - Free Report) – Up 14.9%
This fund creates three times leveraged long position in the Health Care Select Sector Index while charging 95 bps in fees a year. It has $153.8 million in AUM and trades in volumes of 72,000 shares on average.
MicroSectors U.S. Big Banks Index 3X Leveraged ETN (BNKU - Free Report) – Up 14.8%
BNKU seeks to provide three times exposure to the Solactive MicroSectors U.S. Big Banks Index. The ETN has accumulated $37.1 million in its asset base. It charges 95 bps in annual fees and trades in average daily volume of under 1,000 shares (read: Leveraged ETFs That Are Up 25% Plus at Halfway Q4).
Direxion Daily Technology Bull 3x Shares (TECL - Free Report) – Up 12.2%
This ETF targets the technology sector with three times exposure to the Technology Select Sector Index. It has amassed about $868.2 million in its asset base and charges 95 bps in fees per year. Volume is good as it exchanges more than 288,000 shares a day on average.
Bottom Line
While this strategy is highly beneficial for short-term traders, it could lead to huge losses compared to traditional funds in fluctuating or seesawing markets. Further, the performance of the ETFs could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as, weeks or months) due to their compounding effect (see: all the Leveraged Equity ETFs here).
Still, for ETF investors who are bullish on equities for the near term, any of the above products could make an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance, and a belief that the “trend is the friend” in this corner of the investing world.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>