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7 Best Leveraged/Inverse ETFs Up 20% Plus in March
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The month of March proved to be volatile for the U.S. stock market given the rising Treasury yields, which led to a huge sell-off in high beta and growth sectors like technology. In fact, the tech sell-off has wiped out all the gains from the tech-heavy Nasdaq Composite Index made this year, pushing it in red from a year-to-date look.
Additionally, Biden’s first major federal tax hike proposal since 1993 has made investors jittery. The tax hike plan will weigh on companies’ earnings and equity allocations in the short term. Additionally, the third wave of coronavirus in Europe and India continued to weigh on investors’ sentiment lately though the number cases in the United States has reduced drastically.
The combination of rapid COVID-19 vaccinations, progress on vaccines, and an unprecedented stimulus has been the major catalysts for the stock market. President Joe Biden this month signed a massive $1.9 trillion new stimulus. The rounds of solid upbeat economic data also indicate stronger-than-expected recovery. As such, the S&P 500 and the Dow Jones touched a series of new peaks in March (read: Recovering Economy Drives Bets for S&P 500 ETFs).
Amid the bull and bear tug-of-war, the demand for leveraged and inverse-leveraged ETFs has increased as these could fetch outsized returns on quick market turns in a short span. These products either create a leveraged long/short position, an inverse long/short position or a leveraged inverse long/short position in the underlying index through the use of swaps, options, future contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time provided the trend remains a friend.
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as, weeks or months).
Still, we have highlighted some leveraged/inverse products that have gained more than 20% this month though these involve a great deal of risk when compared with the traditional products. This trend might continue at least for the near term if sentiments remain the same.
NAIL provides leveraged exposure to homebuilders and creates a three times long position in the Dow Jones U.S. Select Home Construction Index. It charges an annual fee of 95 bps and trades in a good average daily volume of about 608,000 shares. The fund has accumulated $396.7 million in its asset base.
This product seeks to deliver three times the inverse daily performance of the S&P Biotechnology Select Industry Index. The fund has amassed $84.8 million in its asset base and has an average daily volume of more than 3.8 million shares. It charges investors 95 bps in annual fees and expenses (read: Top Inverse/Leveraged ETFs of Last Week).
TPOR targets the transportation sector and seeks to deliver three times the daily performance of the Dow Jones Transportation Average. The product has AUM of $72.9 million and charges 95 bps in fees and expenses. It trades in lower volumes of about 114,000 shares per day (read: Leveraged ETFs In the Pink After 1 Year of Pandemic).
With AUM of $22.4 million, this fund offers three times exposure to the performance of the Utilities Select Sector Index. It charges investors an annual fee of 95 bps and trades in a lower average daily volume of 82,000 shares.
This ETF offers three times leveraged exposure to the S&P Retail Select Industry Index. The product has amassed about $100.8 million in its asset base, while charging 95 bps in fees per year. It exchanges around 113,000 shares a day on average.
Direxion Daily Cloud Computing Bear – Up 21.6%
This ETF targets the cloud computing segment of the broad technology sector, offering two times inverse exposure to the performance of the Indxx USA Cloud Computing Index. With AUM of $21.7 million, CLDS has expense ratio of 0.95% and trades in an average daily volume of 10,000 shares (read: 6 Inverse ETFs Riding High on Tech Sell-Off This Week).
This fund seeks to provide three times exposure to Industrial Select Sector Index, charging investors 95 bps in annual fees. It has amassed $68.1 million in its asset base and trades in an average daily volume of 115,000 shares.
Bottom Line
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than what they appear (see: all the Inverse Equity ETFs here).
Still, ETF investors seeking to tap abrupt movements can go long or short in the near term.
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7 Best Leveraged/Inverse ETFs Up 20% Plus in March
The month of March proved to be volatile for the U.S. stock market given the rising Treasury yields, which led to a huge sell-off in high beta and growth sectors like technology. In fact, the tech sell-off has wiped out all the gains from the tech-heavy Nasdaq Composite Index made this year, pushing it in red from a year-to-date look.
Additionally, Biden’s first major federal tax hike proposal since 1993 has made investors jittery. The tax hike plan will weigh on companies’ earnings and equity allocations in the short term. Additionally, the third wave of coronavirus in Europe and India continued to weigh on investors’ sentiment lately though the number cases in the United States has reduced drastically.
The combination of rapid COVID-19 vaccinations, progress on vaccines, and an unprecedented stimulus has been the major catalysts for the stock market. President Joe Biden this month signed a massive $1.9 trillion new stimulus. The rounds of solid upbeat economic data also indicate stronger-than-expected recovery. As such, the S&P 500 and the Dow Jones touched a series of new peaks in March (read: Recovering Economy Drives Bets for S&P 500 ETFs).
Amid the bull and bear tug-of-war, the demand for leveraged and inverse-leveraged ETFs has increased as these could fetch outsized returns on quick market turns in a short span. These products either create a leveraged long/short position, an inverse long/short position or a leveraged inverse long/short position in the underlying index through the use of swaps, options, future contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time provided the trend remains a friend.
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as, weeks or months).
Still, we have highlighted some leveraged/inverse products that have gained more than 20% this month though these involve a great deal of risk when compared with the traditional products. This trend might continue at least for the near term if sentiments remain the same.
Direxion Daily Homebuilders & Supplies Bull 3X Shares (NAIL - Free Report) - Up 30.5%
NAIL provides leveraged exposure to homebuilders and creates a three times long position in the Dow Jones U.S. Select Home Construction Index. It charges an annual fee of 95 bps and trades in a good average daily volume of about 608,000 shares. The fund has accumulated $396.7 million in its asset base.
Direxion Daily S&P Biotech Bear 3x Shares (LABD - Free Report) – Up 26.4%
This product seeks to deliver three times the inverse daily performance of the S&P Biotechnology Select Industry Index. The fund has amassed $84.8 million in its asset base and has an average daily volume of more than 3.8 million shares. It charges investors 95 bps in annual fees and expenses (read: Top Inverse/Leveraged ETFs of Last Week).
Direxion Daily Transportation Bull 3X Shares (TPOR - Free Report) – Up 26.2%
TPOR targets the transportation sector and seeks to deliver three times the daily performance of the Dow Jones Transportation Average. The product has AUM of $72.9 million and charges 95 bps in fees and expenses. It trades in lower volumes of about 114,000 shares per day (read: Leveraged ETFs In the Pink After 1 Year of Pandemic).
Direxion Daily Utilities Bull 3X Shares (UTSL - Free Report) – Up 25.3%
With AUM of $22.4 million, this fund offers three times exposure to the performance of the Utilities Select Sector Index. It charges investors an annual fee of 95 bps and trades in a lower average daily volume of 82,000 shares.
Direxion Daily Retail Bull 3X Shares (RETL - Free Report) – Up 22.4%
This ETF offers three times leveraged exposure to the S&P Retail Select Industry Index. The product has amassed about $100.8 million in its asset base, while charging 95 bps in fees per year. It exchanges around 113,000 shares a day on average.
Direxion Daily Cloud Computing Bear – Up 21.6%
This ETF targets the cloud computing segment of the broad technology sector, offering two times inverse exposure to the performance of the Indxx USA Cloud Computing Index. With AUM of $21.7 million, CLDS has expense ratio of 0.95% and trades in an average daily volume of 10,000 shares (read: 6 Inverse ETFs Riding High on Tech Sell-Off This Week).
Direxion Daily Industrials Bull 3X Shares (DUSL - Free Report) – Up 21.2%
This fund seeks to provide three times exposure to Industrial Select Sector Index, charging investors 95 bps in annual fees. It has amassed $68.1 million in its asset base and trades in an average daily volume of 115,000 shares.
Bottom Line
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than what they appear (see: all the Inverse Equity ETFs here).
Still, ETF investors seeking to tap abrupt movements can go long or short in the near term.
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 >>