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Wall Street Turns Green in October: 5 Leveraged ETF Winners
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Wall Street staged a solid comeback last month, with all three major indices logging positive returns. The Dow Jones Industrial Average wrapped up its best month since 1976, surging about 14% in October, while the S&P 500 and the tech-heavy Nasdaq Composite Index gained about 8% and 3.9%, respectively.
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 market that gained more than 35% in October. These include MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report) , Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN - Free Report) , Direxion Daily Industrials Bull 3X Shares (DUSL - Free Report) , ProShares UltraPro Dow30 (UDOW - Free Report) , and AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) . These funds will continue to be investors’ darlings, at least in the near term, provided the sentiments remain bullish.
Hopes for a less hawkish Fed as well as better-than-expected earnings outside the tech sector led to a rally in the stocks. According to CME Group, traders have become more confident the Fed will reduce its rate hike plans from three-quarters to half a percentage point at its December meeting. Many on Wall Street are expecting that Fed to pause its hikes or reduce its rate hike size in the near future. Additionally, investors are betting that traditional stocks like banks will lead the next bull market (read: 4 ETF Areas Up At Least 10% Last Week).
The U.S. economy posted its first period of positive growth in the third quarter. GDP grew 2.6% annually versus the estimate of 2.3%. A narrowing trade deficit as well as increases in consumer spending and government outlays boosted the growth.
We have profiled the ETFs in detail below:
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report) – Up 71.7%
MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times (3X or 300%) leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies. MicroSectors U.S. Big Oil Index 3X Leveraged ETN has been able to manage $2.2 billion in its asset base, while trading in an average daily volume of 190,000 shares. The expense ratio comes in at 0.95%.
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 96 bps and trades in a good average daily volume of about 717,000 shares. Direxion Daily Aerospace & Defense Bull 3X Shares has amassed AUM of $179.9 million in its asset base (read: Why Aerospace & Defense ETFs are Rising).
Direxion Daily Industrials Bull 3X Shares seeks to provide three times exposure to Industrial Select Sector Index, charging investors 97 bps in annual fees. It has amassed $17.8 million in its asset base and trades in an average daily volume of 21,000 shares.
ProShares UltraPro Dow30 tracks the Dow Jones Industrial Average and offers three times exposure to the index. It has amassed $615.5 million in its asset base and trades in a solid average daily volume of 3.5 million shares. The expense ratio comes in at 0.95%.
AdvisorShares MSOS 2x Daily ETF is actively managed and designed for sophisticated investors looking to gain magnified exposure to the U.S. cannabis sector. It offers daily investment results that correspond to two times the daily performance of the AdvisorShares Pure US Cannabis ETF. AdvisorShares MSOS 2x Daily ETF debuted in the space in August and has accumulated $3.8 million in its asset base. It charges 95 bps in annual fees and trades in volume of 25,000 shares a day on average.
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures (see: all the Leveraged Equity ETFs here).
Still, for ETF investors bullish on U.S. stocks for the near term, either of the above products can be 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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Wall Street Turns Green in October: 5 Leveraged ETF Winners
Wall Street staged a solid comeback last month, with all three major indices logging positive returns. The Dow Jones Industrial Average wrapped up its best month since 1976, surging about 14% in October, while the S&P 500 and the tech-heavy Nasdaq Composite Index gained about 8% and 3.9%, respectively.
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 market that gained more than 35% in October. These include MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report) , Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN - Free Report) , Direxion Daily Industrials Bull 3X Shares (DUSL - Free Report) , ProShares UltraPro Dow30 (UDOW - Free Report) , and AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) . These funds will continue to be investors’ darlings, at least in the near term, provided the sentiments remain bullish.
Hopes for a less hawkish Fed as well as better-than-expected earnings outside the tech sector led to a rally in the stocks. According to CME Group, traders have become more confident the Fed will reduce its rate hike plans from three-quarters to half a percentage point at its December meeting. Many on Wall Street are expecting that Fed to pause its hikes or reduce its rate hike size in the near future. Additionally, investors are betting that traditional stocks like banks will lead the next bull market (read: 4 ETF Areas Up At Least 10% Last Week).
The U.S. economy posted its first period of positive growth in the third quarter. GDP grew 2.6% annually versus the estimate of 2.3%. A narrowing trade deficit as well as increases in consumer spending and government outlays boosted the growth.
We have profiled the ETFs in detail below:
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report) – Up 71.7%
MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times (3X or 300%) leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies. MicroSectors U.S. Big Oil Index 3X Leveraged ETN has been able to manage $2.2 billion in its asset base, while trading in an average daily volume of 190,000 shares. The expense ratio comes in at 0.95%.
Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN - Free Report) – Up 53.7%
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 96 bps and trades in a good average daily volume of about 717,000 shares. Direxion Daily Aerospace & Defense Bull 3X Shares has amassed AUM of $179.9 million in its asset base (read: Why Aerospace & Defense ETFs are Rising).
Direxion Daily Industrials Bull 3X Shares (DUSL - Free Report) – Up 21.2%
Direxion Daily Industrials Bull 3X Shares seeks to provide three times exposure to Industrial Select Sector Index, charging investors 97 bps in annual fees. It has amassed $17.8 million in its asset base and trades in an average daily volume of 21,000 shares.
ProShares UltraPro Dow30 (UDOW - Free Report) – Up 37.7%
ProShares UltraPro Dow30 tracks the Dow Jones Industrial Average and offers three times exposure to the index. It has amassed $615.5 million in its asset base and trades in a solid average daily volume of 3.5 million shares. The expense ratio comes in at 0.95%.
AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) – Up 36.5%
AdvisorShares MSOS 2x Daily ETF is actively managed and designed for sophisticated investors looking to gain magnified exposure to the U.S. cannabis sector. It offers daily investment results that correspond to two times the daily performance of the AdvisorShares Pure US Cannabis ETF. AdvisorShares MSOS 2x Daily ETF debuted in the space in August and has accumulated $3.8 million in its asset base. It charges 95 bps in annual fees and trades in volume of 25,000 shares a day on average.
Bottom Line
As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing — when combined with leverage — may make these products deviate significantly from the expected long-term performance figures (see: all the Leveraged Equity ETFs here).
Still, for ETF investors bullish on U.S. stocks for the near term, either of the above products can be 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.