6 Inverse Leveraged ETFs Soaring To Start 2016

By | January 12, 2016

Scalper1 News

As fresh signs of a slowdown in China and a relentless slide in crude sparked off fears of a global slowdown, the U.S. stocks posted their worst five-day start to the year in history. The S&P 500 index plunged 6% while Dow Jones tumbled 6.2% last week. The tech-heavy Nasdaq Composite index, which outperformed last year, lost 7.3%. Additionally, a strong dollar, geopolitical tensions in the Middle East and weak corporate earnings are weighing heavily on investor sentiment. This is especially true as earnings in the S&P 500 are projected to decline 5.3% for Q4 2015. This would mark three consecutive quarters of a year-over-year decline in earnings since Q1 2009 to Q3 2009, as per the earnings Factset . Amid myriad woes, investors have little reason to believe that the bull market will complete its seventh year on March 9 and thus shunned U.S. equities. According to etf.com , investors pulled out $5.8 billion in capital from U.S. equity ETFs. This has resulted in huge demand for inverse or leveraged inverse ETFs for investors seeking to make big gains in a short span. In fact, many products provided outsized gains (over 30%) in the first week of 2016, though these involve a great deal of risk when compared to traditional products. Below, we have highlighted five such ETFs that crushed the market last week and should continue doing so at least for the near term if global sentiments remain volatile. These products either create an inverse long/short position or leveraged inverse long/short position in the underlying index through the use of swaps, options, future contracts and other financial instruments. Direxion Daily S&P Biotech Bear 3x Shares (NYSEARCA: LABD ) This product seeks to deliver thrice (3x or 300%) the inverse (opposite) daily performance of the S&P Biotechnology Select Industry Index. The fund has amassed $33.4 million in its asset base and average daily volume of more than 632,000 shares. It charges investors 95 bps in annual fees and expenses. The ETF delivered whopping returns of 51.8% in the first week of 2016. VelocityShares 3x Inverse Crude ETN (NYSEARCA: DWTI ) This product provides three times inverse exposure to the daily performance of the S&P GSCI Crude Oil Index Excess Return. The ETN is a bit pricey as it charges 1.35% in annual fees while average daily volume is solid at 1.4 million shares. It has managed $374 million in its asset base and surged 38.4% last week. ProShares UltraProShort Nasdaq Biotechnology (NASDAQ: ZBIO ) This fund seeks to deliver thrice the inverse performance of the NASDAQ Biotechnology Index. It has accumulated $12 million in its AUM and charges 95 bps in annual fees. Average trading volume is moderate, exchanging about 73,000 shares a day in hand. The fund gained nearly 38.1% in the same time frame. Direxion Daily FTSE China Bear 3x Shares (NYSEARCA: YANG ) This fund provides thrice the inverse return of the FTSE China 50 Index. The product has AUM of around $82.8 million and sees good trading volume of 251,000 shares a day on average. Expense ratio came in at 0.95%. YANG returned nearly 36.2% over the past one-week period. Direxion Daily Semiconductor Bear 3x Shares (NYSEARCA: SOXS ) This ETF provides three times inverse exposure to the PHLX Semiconductor Sector Index. It charges 0.95% in annual fees and trades in average daily volume of more than 117,000 shares. It has managed $45.9 million in its asset base and gained 33.3% last week. Direxion Daily Natural Gas Related Bear 3x Shares (NYSEARCA: GASX ) This product provides three times inverse exposure to the natural gas segment of the equity market, which tracks the ISE-Reverse Natural Gas Index. It has amassed $3.8 million in its asset base while volume is paltry at around 8,000 shares. Expense ratio came in at 0.95%. GASX was up 31.5% in the first week of 2016. Bottom Line As a caveat, investors should note that such products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing – when combined with leverage – may force these products to deviate significantly from the expected long-term performance figures. Still, for ETF investors who are bearish on the equities and oil for the near term, either of the above products could make an interesting choice. Clearly, a near-term short 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. Original Post Scalper1 News

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