Direxion's ETFs on Steroids

Reader Comments
Back to blog

LATEST WALL STREET INNOVATION – DIREXON Exchange Traded Funds
Look at these DIREEXON 3.0 Beta ETFs. They currently have four long ETFs and four short funds all with 3.0 beta – that’s a 300% correlation to its derivative index…
BULL-LONG (+3.0 Beta):
BGU - LARGE CAP RUS 1000
TNA - SMALL CAP RUS 2000
ERX - ENERGY RUS 1000
FAS - FIN'L RUS 1000
BEAR-INVERSE (-3.0 Beta):
BGZ - LARGE CAP RUS 1000
TZA - SMALL CAP RUS 2000
ERY - ENERGY RUS 1000
FAZ - FIN'L RUS 1000
These are just as good as the ProShares 2.0 Beta ETFs but with an additional 1.0 Beta. DIREXON will be adding 36 similar 3.0 Beta ETFs in the near future. This will change the way ETFs are traded. One possible drawback, because these ETFs just began trading on 11/5/08, they are a little light on trading volume, which will improve significantly in a month or so. By then, these will be making front page news.
In the last two days 11/19 and 11/20/08 (given our very weak market conditions), FAZ increased in value by 57.92%. These highly leveraged ETFs are for your limited discretionary funds only, but what potential !!
As the 3.0 Beta would suggest, these are extremely volatile ETFs and must be carefully managed and traded, making the right decisions at the right time. This is all about proactively harnessing the atom of high profit trading, for only select discretionary funds, in both the best and the worst of times. Checkout www.direxionshares.com.
Good Luck, Rich

Rich88 of WA 8:09PM November 21, 2008

It seems clear to me that this type of shorting-made-easy for the average shmoe is likely contributing to our jaggedy plummet downwards.
What I'm scanning though news reporting on this topic looking for is
HOW exactly these outfits go about acheiving the so-called 3X.. (and how much theyre skimming would be interesting as well..)

ClassConscious of MT 3:51PM November 19, 2008

The Chief makes legitimate arguments about the potential uses of bear funds or levered funds, but the problem with constant leverage portfolios is that the rebalancing act that has to occur to maintain the leverage ratio necessarily destroys returns.
Additionally, these funds charge ludicrous management fees, so unless other mechanisms to achieve the same directional position are unavailable to you, these funds should really be avoided.
Long term investors should absolutely avoid these at all costs and short term investors should only use them in VERY rare circumstances.
http://fattyfatfat.com/2008/11/leveraged-etfs-suck-avoid-direxion-3x-funds/

Fatty 11:05PM November 17, 2008

I think these products are great. Of course they should be used with care. For small buy-n-hold investors that does'nt want to sell (long term holdings, tax reansons) they are good as a portfolio protection, an retail investor may allocate a small part of their total portfolio, maybe 5% into one of these inverse 3x index funds. This would protect the overall portfolio to some degree like an airbag.
In the same way an 3x fund tracking the interest rate markets could be used to protect against a down turn in the housing market like we are witnessing. If short term/long term rates rise the leveraged fund go up and offsets the decline in the value of your house, depending on how much you want to protect. This has only been possible with options and futures but they are way advanced and complex to be utilized by average citizens.

Nick Reed of NY 11:29AM November 17, 2008

. I both agree AND disagree with Jim of PA.
• These investment products are not awful. When used in conjunction with a sound trading and risk management program they can and have allowed mutual fund investors to create the type of wealth that previously was reserved for only the most savvy professional investor.
• An “average” investor who becomes an “informed” investor can profit from these inverse (bear) market mutual funds. The “average” mutual fund investor buys the “hold it for the long-run” advice. Following this advice has devastated millions of mutual fund portfolios.
• Don’t fall for the recent performance numbers of leveraged inverse mutual funds? These numbers are real ( I’ve used them since 2000) and the “statement shock” in my house at the beginning of each month is a pleasant kind of shock. Maybe what Jim of PA meant to say is to not chase the recent performance numbers…I agree on that.
• Falling prey to products you don’t understand did get us in this mess. The ten best inverse mutual funds represent $1 billion in assets (a drop in the mutual fund bucket). Contrast this to the $35 billion in assets that ten (10) of the largest U.S. stock mutual funds hold. These same mutual funds are down an average of -42.81% year to date. Jim of PA is pointing his finger at the wrong products.

The Chief of IL 2:11PM November 14, 2008

reporters need to be more clear with these awful products. any average investor that invests in these inverse funds is making a huge mistake. Please know the pitfalls and dont fall for the recent performance numbers. Falling prey to products you dont understand is what got us in the mess. products like this should be banned.

Jim of PA 10:18AM November 13, 2008

So here is my question. If you invest in this fund and the Russell 1000 were to DROP 40%, how is it possible you could lose 120% when there is still going to be a price on the shares?

of OH 8:36PM November 12, 2008