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Geopolitics kept investors on their toes in February after Russia-Ukraine tensions escalated. Though all the major U.S. indices posted sharp losses during the month, a few sectors have been the biggest beneficiaries of the crisis. This has resulted in huge demand for leveraged ETFs as investors sought to register big gains in a short span.
We highlight a bunch of the best-performing leveraged equity ETFs from different corners of the rising market that gained more than 20% in February. These include Direxion Daily Metal Miners Bull 2X Shares , Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN - Free Report) , Direxion Daily Global Clean Energy Bull 2X Shares (KLNE - Free Report) , ProShares Ultra Nasdaq Cybersecurity ETF (UCYB - Free Report) and Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares (GUSH - Free Report) .
These funds will continue to be investors’ darlings at least in the near term, provided the sentiments remain bullish.
Geopolitics
Russia invaded Ukraine and the West slapped a slew of sanctions against Russia that could hamper ongoing global economic growth. The tensions between the two countries worsened after Western countries slapped fresh sanctions on Russia for invading Ukraine and president Vladimir Putin put his country's nuclear deterrent on high alert. Western nations like the United States, Britain, Europe and Canada have blocked some Russian banks from the SWIFT international payments system. New measures also include restrictions on the Russian central bank's international reserves.
In particular, commodity producers are benefiting as the tensions have led to supply disruption fears in an already-tight commodity market, given that Russia is a commodities powerhouse and a key supplier of energy, metals and agri. Oil topped $100 per barrel while gold topped $1900 per ounce on its safe-haven status. Nickel and aluminum prices soared to multi-year highs while wheat and corn also spiked. The conflict could disrupt grain flows from the key Black Sea export region. Russia is the world's third-largest producer of gold as well (read: Russia-Ukraine Crisis Spark Rally in Commodity ETFs).
Agri commodities also jumped on the ongoing crisis. Notably, Ukraine is a major exporter of corn and wheat. Together, Russia and Ukraine account for roughly 29% of the global wheat export market.
Meanwhile, the defense and cybersecurity sectors are also showing immense strength. Any warfare or military strike means increased purchase and usage of weapons that will benefit the defense industry. Cybersecurity stocks have surged as many experts warned about the possibility of cyberattacks by Russia in retaliation to Western sanctions. In fact, cyberattacks appear to be part of Russia’s war strategy.
Leveraged ETFs
Leveraged funds provide increased exposure (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, provided the trend remains positive.
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).
Investors should note that these products are suitable only for short-term traders as they 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 Leveraged Equity ETFs here).
We have profiled the ETFs in detail below:
Direxion Daily Metal Miners Bull 2X Shares – Up 62.9%
Direxion Daily Metal Miners Bull 2X Shares provides two times (2X or 200%) leveraged exposure to the S&P Metals and Mining Select Industry Index, which is designed to measure the performance of the equity securities of companies in industries of aluminum; coal & consumable fuels; copper; diversified metals & mining; gold; precious metals & minerals; silver; and steel.
Direxion Daily Metal Miners Bull 2X Shares has accumulated $10.3 million in its asset base since its inception in late December. It charges 95 bps in annual fees and trades in an average daily volume of 7,000 shares.
Direxion Daily Aerospace & Defense Bull 3X Shares creates three times leveraged long position in the Dow Jones U.S. Select Aerospace & Defense Index. It charges an annual fee of 95 bps and trades in a good average daily volume of about 1.5 million shares.
Direxion Daily Global Clean Energy Bull 2X Shares (KLNE - Free Report) – Up 36.6%
Direxion Daily Global Clean Energy Bull 2X Shares creates two times leveraged long position in the S&P Global Clean Energy Index. It charges an annual fee of 95 bps and trades in a lower average daily volume of about 8,000 shares.
Direxion Daily Global Clean Energy Bull 2X Shares has accumulated $5.7 million in its asset base and charges 95 bps in annual fees.
ProShares Ultra Nasdaq Cybersecurity provides two times exposure to the daily performance of the Nasdaq CTA Cybersecurity Index, charging 3.56% in annual fees. The index is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrial sectors (read: Why Cybersecurity ETFs are Rising amid Russia-Ukraine Crisis).
ProShares Ultra Nasdaq Cybersecurity has been able to manage assets worth $3.1 million.
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares (GUSH - Free Report) – Up 23.1%
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares offers two times exposure to the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares has accumulated $837.1 million in its asset base and the average daily volume is solid at around 1.7 million shares. The ETF charges 95 bps in annual fees.
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5 Leveraged ETFs Up More Than 20% in February
Geopolitics kept investors on their toes in February after Russia-Ukraine tensions escalated. Though all the major U.S. indices posted sharp losses during the month, a few sectors have been the biggest beneficiaries of the crisis. This has resulted in huge demand for leveraged ETFs as investors sought to register big gains in a short span.
We highlight a bunch of the best-performing leveraged equity ETFs from different corners of the rising market that gained more than 20% in February. These include Direxion Daily Metal Miners Bull 2X Shares , Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN - Free Report) , Direxion Daily Global Clean Energy Bull 2X Shares (KLNE - Free Report) , ProShares Ultra Nasdaq Cybersecurity ETF (UCYB - Free Report) and Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares (GUSH - Free Report) .
These funds will continue to be investors’ darlings at least in the near term, provided the sentiments remain bullish.
Geopolitics
Russia invaded Ukraine and the West slapped a slew of sanctions against Russia that could hamper ongoing global economic growth. The tensions between the two countries worsened after Western countries slapped fresh sanctions on Russia for invading Ukraine and president Vladimir Putin put his country's nuclear deterrent on high alert. Western nations like the United States, Britain, Europe and Canada have blocked some Russian banks from the SWIFT international payments system. New measures also include restrictions on the Russian central bank's international reserves.
In particular, commodity producers are benefiting as the tensions have led to supply disruption fears in an already-tight commodity market, given that Russia is a commodities powerhouse and a key supplier of energy, metals and agri. Oil topped $100 per barrel while gold topped $1900 per ounce on its safe-haven status. Nickel and aluminum prices soared to multi-year highs while wheat and corn also spiked. The conflict could disrupt grain flows from the key Black Sea export region. Russia is the world's third-largest producer of gold as well (read: Russia-Ukraine Crisis Spark Rally in Commodity ETFs).
Agri commodities also jumped on the ongoing crisis. Notably, Ukraine is a major exporter of corn and wheat. Together, Russia and Ukraine account for roughly 29% of the global wheat export market.
Meanwhile, the defense and cybersecurity sectors are also showing immense strength. Any warfare or military strike means increased purchase and usage of weapons that will benefit the defense industry. Cybersecurity stocks have surged as many experts warned about the possibility of cyberattacks by Russia in retaliation to Western sanctions. In fact, cyberattacks appear to be part of Russia’s war strategy.
Leveraged ETFs
Leveraged funds provide increased exposure (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, provided the trend remains positive.
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).
Investors should note that these products are suitable only for short-term traders as they 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 Leveraged Equity ETFs here).
We have profiled the ETFs in detail below:
Direxion Daily Metal Miners Bull 2X Shares – Up 62.9%
Direxion Daily Metal Miners Bull 2X Shares provides two times (2X or 200%) leveraged exposure to the S&P Metals and Mining Select Industry Index, which is designed to measure the performance of the equity securities of companies in industries of aluminum; coal & consumable fuels; copper; diversified metals & mining; gold; precious metals & minerals; silver; and steel.
Direxion Daily Metal Miners Bull 2X Shares has accumulated $10.3 million in its asset base since its inception in late December. It charges 95 bps in annual fees and trades in an average daily volume of 7,000 shares.
Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN - Free Report) – Up 42.6%
Direxion Daily Aerospace & Defense Bull 3X Shares creates three times leveraged long position in the Dow Jones U.S. Select Aerospace & Defense Index. It charges an annual fee of 95 bps and trades in a good average daily volume of about 1.5 million shares.
Direxion Daily Aerospace & Defense Bull 3X Shares has amassed AUM of $257.3 million in its asset base (read: 5 Sector ETFs Benefiting From Russia-Ukraine Tensions).
Direxion Daily Global Clean Energy Bull 2X Shares (KLNE - Free Report) – Up 36.6%
Direxion Daily Global Clean Energy Bull 2X Shares creates two times leveraged long position in the S&P Global Clean Energy Index. It charges an annual fee of 95 bps and trades in a lower average daily volume of about 8,000 shares.
Direxion Daily Global Clean Energy Bull 2X Shares has accumulated $5.7 million in its asset base and charges 95 bps in annual fees.
ProShares Ultra Nasdaq Cybersecurity ETF (UCYB - Free Report) – Up 24%
ProShares Ultra Nasdaq Cybersecurity provides two times exposure to the daily performance of the Nasdaq CTA Cybersecurity Index, charging 3.56% in annual fees. The index is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrial sectors (read: Why Cybersecurity ETFs are Rising amid Russia-Ukraine Crisis).
ProShares Ultra Nasdaq Cybersecurity has been able to manage assets worth $3.1 million.
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares (GUSH - Free Report) – Up 23.1%
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares offers two times exposure to the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
Direxion Daily S&P Oil & Gas Exploration & Production Bull 2X Shares has accumulated $837.1 million in its asset base and the average daily volume is solid at around 1.7 million shares. The ETF charges 95 bps in annual fees.