Direxion Launches 3X Leveraged ETFs

Last week was an historic moment in American history as the United States elected its first African American president, but it was also an historic day for the ETF investing enthusiast.

Shortly after the ballots were counted, and America knew who their next commander-in-chief was going to be, Direxion finally launched their newest investment products, a family of 3X Leveraged ETFs. A lineup that includes both bull and bear strategies for the Russell 1000 and 2000 indexes, and the energy and financial sectors, should grab the attention of traders and investors in the coming weeks and months. With volatility at an all time high recently, the daily returns of these funds should both excite, and scare onlookers.

Here is a rundown of the 3X funds that Direxion now offers:

• (BGU) – Large Cap Bull 3X Shares – Russell 1000
• (BGZ) – Large Cap Bear 3X Shares – Russell 1000
• (TNA) – Small Cap Bull 3X Shares – Russell 2000
• (TZA) – Small Cap Bear 3X Shares – Russell 2000
• (ERX) – Energy Bull 3X Shares – Russell 1000 Energy
• (ERY) – Energy Bear 3X Shares – Russell 1000 Energy
• (FAS) – Financial Bull 3X Shares – Russell 1000 Financial Services
• (FAZ) – Financial Bear 3X Shares – Russell 1000 Financial Services

Although trading in these new ETFs is currently light, expect more liquidity in the coming months as more investors and traders become aware of these new funds, much like the launch of the very popular ProShares 2X ETFs. Many of the popular ProShares funds like UYG and SKF were slow at first, but now they turn out a tremendous amount of volume on a daily basis. As for the expense ratios for these new triple return ETFs, they are listed from 94 to 102 basis points, which is fair for 3X leverage. As these funds gain in popularity, I would expect more fund launches in additional sectors.

Disclosure: none

Comments

[Fatty:]

Levered ETFs sound great at first, especially if you're looking to make big bets, but ultimately they're not a good investment.

There are better ways to achieve the same level of leverage.

2008 Nov 17 10:58 PM

[Fatty:]

Check out my post about the pitfalls of 3x levered ETFs at FattyFatFat

2008 Nov 17 11:00 PM

[Bob'29:]

FORTHCOMING CLASS ACTION LAWSUIT?: There have been two salient pieces of analyst insight into Direxion Funds that portray a picture of malific manipulation on the part of the Funds. One by Jim Cramer in a rant that these should be illegal, because they dump shares at the end of the trading day. This means that if you are not a day trader; there is no correlation to the related index that these funds portend to follow. There was another another piece that demonstrated this graphically by charting both a long and a short Direxion ETF against their followed index. BOTH the long and the short were BELOW the index after the charted period of time. Lets look for our letters asking for our participation in the legal action.

2008 Dec 08 12:35 PM