New Direxion 3x ETFs Offer Investors 'Bonds on Crack'

By John Schloegel

If Xander Cage (AKA Triple X) were ripping trades on a fixed income desk, he’d be in a tizzy today. Moreover, our boy Vin Diesel would be slipping into his outstanding Boiler Room persona named Chris to talk about what’s new in town - and that would be the Direxion Shares 3x Bond ETFs.

You heard me right, and call it what you want - juiced fixed income, bonds on crack, nitroglycerin-based treasuries - but traders can now access leveraged 10- and 30-year U.S. Treasury benchmarks both long and short, combined with 3x the upside or downside.

Even if your name is Yorgi and you lead a group called “Anarchy 99,” you’ll still be all over these new ETFs. That is, if you’re an equity guy trying to game fixed income!

Here’s the scoop. Direxion added four ETFs today - two are bull funds and two are bearish:

The bullish funds are:

• Direxion Daily 10-Year Treasury Bull 3x Shares (TYD)
• Direxion Daily 30-Year Treasury Bull 3x Shares (TMF)

The bearish funds are:

• Direxion Daily 10-Year Treasury Bear 3x Shares (TYO)
• Direxion Daily 30-Year Treasury Bear 3x Shares (TMV)

We’ve certainly enjoyed reviewing the incredible success of all of the new Direxion ETFs. For example: FAS trades over 200mm shares a day. How cool is that?

Direxion mentions another new wrinkle in yesterday’s press release (.pdf). They are changing the name of all funds to include the word “Daily” in the title. They are going to great lengths to make sure folks understand how these funds are designed for day traders and not meant as long-term investments! We applaud them for that, as we chuckle time and time again when we read other pundits slamming leveraged ETF product for not performing well. Rather than point fingers or assign blame, they should find time to read the prospectus and maybe do a little homework.

I’ll close with a special quote from Agent XXX - as those who do trade the leveraged ETFs are playing with nitroglycerin…..

Xander Cage: [to Yorgi] Yeah; cars, boards, bikes. I like anything fast enough to do something stupid in.

Good Luck!

• More on choosing the right ETF

Comments

[ETFtrader:]

This would be great news for all the day traders out there IF ONLY there was some interest in trading any of the above. As of this writing, only TMV has traded enough to warrant even the slightest amount of (morbid) interest.Until then, I'll stick with FAS, FAZ and the like. Fewer than 10 million shares traded per day? Trust me-don't waste your time.

Apr 17 12:36 PM

[ETFtrader:]

Further thoughts on Ron's article-I really wish there was a surefire way to get a lot of people interested in these new ETFs(and trading in them, of course). I really do. In the meantime, I refuse to risk any capital in any of them, even if it is only for an hour or two. Sigh...

Apr 17 12:41 PM

[moneynevers...:]

There is a major issue with liquidity given that there are SO many ETFs many of which are not even known to investors. Plus Cramer has been pretty negative on leveraged ETF's which is a negative for the industry but is really unwarranted given how beneficial these products can be when used correctly.

moneyneversleepsblog.b...

Apr 17 06:39 PM

[cayman a-d:]

This is the boom time for these funds. There will be a bust soon as the volatility begins to wane but until then I figure these will be received and "hits" among traders . I for one love the treasury trade.

Cudos to the author for stressing and highlighting the fact that this is for day traders, not for investors.

Apr 17 08:04 PM

[searcher:]

These are vortices in the windstorm of the market. Hubris and a serious lack of liquidity could turn just a little inattention into a ripe tide ride past the shelf.

Apr 18 11:47 AM

[roll the bones:]

I agree with "moneyneversleeps". Cramer can bellyache all he wants. The 50 day moving avg. for volume on FAS is +242,000,000. Sure, most ETFs don't hold a candle to that, but it sure shows there is an appetite for this type of product. If people lose money because they don't understand how they work, or they hold onto losses thinking "it will come back", they are not meant to be trading this type of product. Trading these without a defined stop loss is like jumping out a plane without a parachute and hoping you land on something soft. There is no lack of information on these ETFs, so let the buyer beware. The Direxion website makes it quite clear these are trading vehicles, not investments. It always amazes me that someone will spend hours researching and pricing a department store item to save 5 or 10 bucks and then throw $10K at a leveraged ETF they don't understand and then blame Wall Street for taking their money.


On Apr 17 06:39 PM moneyneversleeps wrote:

> There is a major issue with liquidity given that there are SO many
> ETFs many of which are not even known to investors. Plus Cramer has
> been pretty negative on leveraged ETF's which is a negative for the
> industry but is really unwarranted given how beneficial these products
> can be when used correctly.
>
> moneyneversleepsblog.b...

Apr 18 01:06 PM

[rayman:]

I owned the TBT, the Direxions don't even have dividend yields like TBT/TLT. If it's risk you want, why don't you just buy the TNX index call or put options off of the yield index directly?
If there is a way to hedge your risk exposure or just buy options directly though, it could be interesting for those one off government referee events in the playing field, but Direxion didn't release options for a while on the last ones.

Apr 18 03:24 PM

[Mr. Man:]

Nice of them to include the word “Daily” in the title.
('Bonds on crack' LOL)

Apr 22 10:40 AM