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5 Leveraged or Inverse ETFs That Gained Over 25% in March
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March was a month of sharp bond and stock volatility triggered by the bank crisis. Yet, the major indices ended the month in green. The S&P 500 and the Dow Jones climbed 3.5% and 1.9%, respectively, while the tech-heavy Nasdaq Composite Index outperformed, gaining 6.7%.
This led to higher demand for leveraged and inverse-leveraged ETFs as these fetched outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that have gained double digits in March. These include MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) , MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) , BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) , ETFMG Prime 2X Daily Junior Silver Miners ETF , and ProShares UltraPro QQQ (TQQQ - Free Report) . The funds will remain investors’ darlings, provided the sentiments remain volatile.
While the financial sector plunged after a series of bank failures, a forced-takeover of Credit Suisse and a flight of deposits from smaller institutions, technology took flight on expectations over loose monetary policy.
The banking turmoil started earlier last month with the collapse of two regional U.S. lenders that had sparked concerns about a broader financial crisis and led to a dramatic shift in monetary policy expectations from the Fed. Traders' bets are now almost equally split between a pause and a 25-bps rate hike by the Fed in May, according to CME Group's Fedwatch tool.
Meanwhile, the fears over bank contagion across the globe have compelled investors to adopt an old strategy and flock toward mega-cap, cash-rich tech balance sheets and durable revenue streams. This is especially true as these companies have strong balance sheets and robust profit margins, and are better positioned to withstand a possible economic downturn. These are also set to benefit from a sharp drop in bond yields. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.
The banking scare has also raised the appeal for the yellow metal as a safe haven and a store of value. The yellow metal jumped above the 2,000 mark after the sudden collapse of two U.S. regional banks. Bitcoin, the largest digital currency by market value, also gained momentum and topped 26,000 for the first time since June 2022 in mid-March when market sentiments were positive (read: Gold Shines in March: 5 ETFs That Gained the Most).
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs 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, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
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 these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear.
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) – Up 60.2%
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN seeks to offer three times inverse leveraged exposure to the Solactive MicroSectors U.S. Big Banks Index. The benchmark includes 10 U.S. stocks in the banking sector with the largest free-float market capitalization in equal weights (read: ETF Winners From the Fed Meeting & Yellen's Testimony).
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN has accumulated $14.9 million in its asset base. It charges 95 bps in annual fees and trades in an average daily volume of about 210,000 shares.
MicroSectors Gold Miners 3X Leveraged ETN seeks to deliver three times the performance of the S-Network MicroSectors Gold Miners Index. It has amassed $118.2 million in its asset base and charges 95 bps in annual fees.
MicroSectors Gold Miners 3X Leveraged ETN trades in an average daily volume of 305,000 shares.
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 39.8%
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 bps in annual fees.
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN has accumulated $1.2 billion in its asset base and trades in an average daily volume of 2.3 million shares.
ETFMG Prime 2X Daily Junior Silver Miners ETF – Up 30.2%
ETFMG Prime 2X Daily Junior Silver Miners ETF offers two times leveraged exposure to the silver mining exploration and production industry and follows the Prime Junior Silver Miners and Explorers Index.
ETFMG Prime 2X Daily Junior Silver Miners ETF has been able to manage $5.5 billion in its asset base, while trading in an average daily volume of 106,000 shares. The expense ratio comes in at 0.95%.
Image: Bigstock
5 Leveraged or Inverse ETFs That Gained Over 25% in March
March was a month of sharp bond and stock volatility triggered by the bank crisis. Yet, the major indices ended the month in green. The S&P 500 and the Dow Jones climbed 3.5% and 1.9%, respectively, while the tech-heavy Nasdaq Composite Index outperformed, gaining 6.7%.
This led to higher demand for leveraged and inverse-leveraged ETFs as these fetched outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that have gained double digits in March. These include MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) , MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) , BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) , ETFMG Prime 2X Daily Junior Silver Miners ETF , and ProShares UltraPro QQQ (TQQQ - Free Report) . The funds will remain investors’ darlings, provided the sentiments remain volatile.
While the financial sector plunged after a series of bank failures, a forced-takeover of Credit Suisse and a flight of deposits from smaller institutions, technology took flight on expectations over loose monetary policy.
The banking turmoil started earlier last month with the collapse of two regional U.S. lenders that had sparked concerns about a broader financial crisis and led to a dramatic shift in monetary policy expectations from the Fed. Traders' bets are now almost equally split between a pause and a 25-bps rate hike by the Fed in May, according to CME Group's Fedwatch tool.
Meanwhile, the fears over bank contagion across the globe have compelled investors to adopt an old strategy and flock toward mega-cap, cash-rich tech balance sheets and durable revenue streams. This is especially true as these companies have strong balance sheets and robust profit margins, and are better positioned to withstand a possible economic downturn. These are also set to benefit from a sharp drop in bond yields. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.
The banking scare has also raised the appeal for the yellow metal as a safe haven and a store of value. The yellow metal jumped above the 2,000 mark after the sudden collapse of two U.S. regional banks. Bitcoin, the largest digital currency by market value, also gained momentum and topped 26,000 for the first time since June 2022 in mid-March when market sentiments were positive (read: Gold Shines in March: 5 ETFs That Gained the Most).
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs 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, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
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 these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear.
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN (BNKD - Free Report) – Up 60.2%
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN seeks to offer three times inverse leveraged exposure to the Solactive MicroSectors U.S. Big Banks Index. The benchmark includes 10 U.S. stocks in the banking sector with the largest free-float market capitalization in equal weights (read: ETF Winners From the Fed Meeting & Yellen's Testimony).
MicroSectors U.S. Big Banks Index -3X Inverse Leveraged ETN has accumulated $14.9 million in its asset base. It charges 95 bps in annual fees and trades in an average daily volume of about 210,000 shares.
MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) – Up 58.4%
MicroSectors Gold Miners 3X Leveraged ETN seeks to deliver three times the performance of the S-Network MicroSectors Gold Miners Index. It has amassed $118.2 million in its asset base and charges 95 bps in annual fees.
MicroSectors Gold Miners 3X Leveraged ETN trades in an average daily volume of 305,000 shares.
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 39.8%
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 bps in annual fees.
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN has accumulated $1.2 billion in its asset base and trades in an average daily volume of 2.3 million shares.
ETFMG Prime 2X Daily Junior Silver Miners ETF – Up 30.2%
ETFMG Prime 2X Daily Junior Silver Miners ETF offers two times leveraged exposure to the silver mining exploration and production industry and follows the Prime Junior Silver Miners and Explorers Index.
ETFMG Prime 2X Daily Junior Silver Miners ETF has been able to manage $5.5 billion in its asset base, while trading in an average daily volume of 106,000 shares. The expense ratio comes in at 0.95%.
ProShares UltraPro QQQ (TQQQ - Free Report) – Up 27.8%
ProShares UltraPro QQQ offers three times the leveraged exposure to the NASDAQ-100 Index (read: Nasdaq-100 Enters Bull Market: ETFs to Ride on).
ProShares UltraPro QQQ amassed $13 billion in AUM and trades in a heavy volume of 175.3 million shares, on average. It charges 86 bps in annual fees.