Direxion's ETFs on Steroids
Some say investing is essentially gambling. Even those who disagree might change their minds after reading up on Direxion Funds' new crop of ETFs, which magnify bets for or against an index using 300 percent leverage (other fund families offer the double-down option of 200 percent leverage, but Direxion is the first to up the ante.)
Consider two of the funds: the Large Cap Bull 3x Shares and the Large Cap Bear 3x Shares, which both use the large-company focused Russell 1000 as a benchmark. As the WSJ points out, if the Russell 1000 rises 2 percent in one day, the Large Cap Bull fund is designed to rise 6 percent (minus expenses). And if the Russell 1000 falls 2 percent in one day, the Bull fund loses about 2 percent.
Clearly, the funds aim to deliver supersized gains, but they'll also produced supersized losses--and in a bumpy market, expect them to bounce around like pinballs.
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New Direxion ETFs - Manage Carefully & Reap Rewards
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
cruddy lack of reporting
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..)
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/
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