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September is on track to be the worst month of the year on growing concerns that the Federal Reserve might maintain high interest rates for an extended period. This anticipation has propelled bond market yields to their highest since 2007, leading to reduced stock prices and affecting other investment sectors.
As a result, the demand for leveraged and inverse-leveraged ETFs has increased as these fetch 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 September. These include AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) , MAX Airlines -3X Inverse Leveraged ETN (JETD - Free Report) , Direxion Daily S&P Biotech Bear 3x Shares (LABD - Free Report) , Direxion Daily MSCI Real Estate Bear 3X Shares (DRV - Free Report) , and Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) . The funds will remain investors’ darlings, provided sentiments remain volatile.
The Fed, in the last meeting, warned of one more rate hike this year if it needed to control inflation and curtailed expectations of rate cuts in 2024. Apart from higher interest rates, the possibility of a federal government shutdown has added to the chaos at the end of the month. Lawmakers have until Sep 30 to agree on a budget or pass a bill to extend the deadline and keep the government open (read: Bet on Quality ETFs as Fed Keeps Rate Steady, View Hawkish).
Further, the latest bouts of weak economic data sparked fears of a slowdown. Consumer confidence in September dropped to the lowest level in four months, according to the Conference Board's monthly survey. Meanwhile, new home sales declined 8.7% in August from July and home prices continued to ascend, with the Case-Shiller index growing 1% year over year in July.
Moreover, Wall Street is grappling with rising oil prices, global economic uncertainties, U.S. auto workers' strike that may intensify inflation, and the reinstatement of U.S. student loan repayments that could impact household spending.
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 or 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.
AdvisorShares MSOS 2x Daily ETF is 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 has accumulated $30.5 million in its asset base. It charges 95 bps in annual fees and trades in a volume of 419,000 shares a day on average (read: Behind the Recent Surge in Marijuana ETFs).
MAX Airlines -3X Inverse Leveraged ETN (JETD - Free Report) – Up 31.1%
MAX Airlines -3X Inverse Leveraged ETN is linked to a 3X times inverse leveraged participation in the daily performance of the Prime Airlines Index. It has gathered $5.6 million in its asset base since its debut in late June and trades in an average daily volume of 5,000 shares. MAX Airlines -3X Inverse Leveraged ETN charges 95 bps in fees per year from investors.
Direxion Daily S&P Biotech Bear 3x Shares seeks to deliver three times the inverse daily performance of the S&P Biotechnology Select Industry Index, which includes domestic companies from the biotechnology industry. It has amassed $73.1 million in its asset base and has an average daily volume of around 4 million shares. LABD charges investors 95 bps in annual fees.
Direxion Daily MSCI Real Estate Bear 3X Shares (DRV - Free Report) – Up 21.9%
Direxion Daily MSCI Real Estate Bear 3X Shares seeks to deliver three times the inverse performance of Real Estate Select Sector Index. It has AUM of $152.5 million and an average daily volume of around 187,000 shares. Direxion Daily MSCI Real Estate Bear 3X Shares charges 95 bps in fees per year.
Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) – Up 17.5%
Daily S&P 500 High Beta Bear 3X Shares offers three times inverse exposure to the performance of the S&P 500 High Beta Index. It has gathered $62.7 million in AUM and trades in an average daily volume of 210,000 shares. Daily S&P 500 High Beta Bear 3X Shares charges 95 bps in fees per year from investors.
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5 Best Leveraged-Inverse ETFs of September
September is on track to be the worst month of the year on growing concerns that the Federal Reserve might maintain high interest rates for an extended period. This anticipation has propelled bond market yields to their highest since 2007, leading to reduced stock prices and affecting other investment sectors.
As a result, the demand for leveraged and inverse-leveraged ETFs has increased as these fetch 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 September. These include AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) , MAX Airlines -3X Inverse Leveraged ETN (JETD - Free Report) , Direxion Daily S&P Biotech Bear 3x Shares (LABD - Free Report) , Direxion Daily MSCI Real Estate Bear 3X Shares (DRV - Free Report) , and Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) . The funds will remain investors’ darlings, provided sentiments remain volatile.
The Fed, in the last meeting, warned of one more rate hike this year if it needed to control inflation and curtailed expectations of rate cuts in 2024. Apart from higher interest rates, the possibility of a federal government shutdown has added to the chaos at the end of the month. Lawmakers have until Sep 30 to agree on a budget or pass a bill to extend the deadline and keep the government open (read: Bet on Quality ETFs as Fed Keeps Rate Steady, View Hawkish).
Further, the latest bouts of weak economic data sparked fears of a slowdown. Consumer confidence in September dropped to the lowest level in four months, according to the Conference Board's monthly survey. Meanwhile, new home sales declined 8.7% in August from July and home prices continued to ascend, with the Case-Shiller index growing 1% year over year in July.
Moreover, Wall Street is grappling with rising oil prices, global economic uncertainties, U.S. auto workers' strike that may intensify inflation, and the reinstatement of U.S. student loan repayments that could impact household spending.
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 or 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.
AdvisorShares MSOS 2x Daily ETF (MSOX - Free Report) – Up 146.9%
AdvisorShares MSOS 2x Daily ETF is 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 has accumulated $30.5 million in its asset base. It charges 95 bps in annual fees and trades in a volume of 419,000 shares a day on average (read: Behind the Recent Surge in Marijuana ETFs).
MAX Airlines -3X Inverse Leveraged ETN (JETD - Free Report) – Up 31.1%
MAX Airlines -3X Inverse Leveraged ETN is linked to a 3X times inverse leveraged participation in the daily performance of the Prime Airlines Index. It has gathered $5.6 million in its asset base since its debut in late June and trades in an average daily volume of 5,000 shares. MAX Airlines -3X Inverse Leveraged ETN charges 95 bps in fees per year from investors.
Direxion Daily S&P Biotech Bear 3x Shares (LABD - Free Report) – Up 23.3%
Direxion Daily S&P Biotech Bear 3x Shares seeks to deliver three times the inverse daily performance of the S&P Biotechnology Select Industry Index, which includes domestic companies from the biotechnology industry. It has amassed $73.1 million in its asset base and has an average daily volume of around 4 million shares. LABD charges investors 95 bps in annual fees.
Direxion Daily MSCI Real Estate Bear 3X Shares (DRV - Free Report) – Up 21.9%
Direxion Daily MSCI Real Estate Bear 3X Shares seeks to deliver three times the inverse performance of Real Estate Select Sector Index. It has AUM of $152.5 million and an average daily volume of around 187,000 shares. Direxion Daily MSCI Real Estate Bear 3X Shares charges 95 bps in fees per year.
Daily S&P 500 High Beta Bear 3X Shares (HIBS - Free Report) – Up 17.5%
Daily S&P 500 High Beta Bear 3X Shares offers three times inverse exposure to the performance of the S&P 500 High Beta Index. It has gathered $62.7 million in AUM and trades in an average daily volume of 210,000 shares. Daily S&P 500 High Beta Bear 3X Shares charges 95 bps in fees per year from investors.