Bullish and bearish leveraged ETFs are frequently the source of
much criticism and scrutiny. Much of that stems from
the misuse of these products
as investments, not trades.
Daily recalculations and frequent rolling of derivative
contracts used to juice these funds' returns often lead to returns
that, over time, look nothing like what the underlying index
delivered. The reality is that leveraged ETFs get a bad rap, but
much of that tarnished reputation comes from the fact these
products are not suitable buy-and-hold investments.
In other words, proper use of these ETFs can lead investors to
some impressive short-term gains. With volatility high and the
bears looking as though they have gained some steam in recent days,
the current market environment is ideally suited to initiating a
couple of quick trades with a leveraged ETF or two. These four ETFs
look especially appealing.
ProShares UltraPro Short QQQ (NASDAQ:
) Apple's (NASDAQ:
) earnings report was a buzz kill. Apple's profit report and
guidance were anticipated to catalyze the market to move higher
again. Instead, the largest U.S. company by market value provided
that have endangered several ETFs
with large weights to the stock.
One of those ETFs is the PowerShares QQQ (NASDAQ:
), colloquially known as the Nasdaq 100 ETF. SQQQ is the
triple-leveraged bearish equivalent of QQQ. With Apple's results
disappointing and Amazon's (NASDAQ: ) quarterly update scheduled
for Thursday, SQQQ could be worth a brief trade.
ProShares Ultra Short Industrials (NYSE: ) A surprisingly strong
earnings report from Dow component Caterpillar (NYSE: ) is buoying
the industrial sector a little bit on Wednesday. Plus, it is worth
noting that in the past month, the Industrial Select Sector SPDR
(NYSE: ) and the iShares Dow Jones U.S. Industrial Sector Index
Fund (NYSE: ) are each up 1.4 percent.
That does not hide the fact that economic bellwether UPS (NYSE:
) was rocked by a poor earnings report on Tuesday. If XLI and IYJ
breakdown, head to SJI. SJI tracks the same index as IYJ on a
double-leveraged inverse basis.
Direxion Daily Gold Miners Bear 3X Shares (NYSE: ) Shares of
precious metal miners and the relevant ETFs have flummoxed
investors for nearly two years now. The confusion comes from rising
gold prices and lagging performance for mining equities. Aside from
a decent run higher by the miners in late May into early June, the
trend has been lower for this group.
Investors now know a few things about this situation. First, it
is possible for gold futures to move higher while the miners get
left behind. Second, this has been playing out for so long that
calling a bottom or rally in the miners is becoming harder and
harder. Finally, miners are stocks, meaning that even if gold
futures move up in a down market for equities, that does not mean
miners will be treated any differently than any other sector that
is drawing selling pressure.
All of those factors make the Direxion Daily Gold Miners Bear 3X
Shares worth getting to know on a short-term basis.
Direxion Daily 7-10 Year Treasury Bull 3X Shares (NYSE: ) Along
with the usual words of caution relevant to leveraged ETFs,
investors should note TYD is thinly traded with average daily
volume of just over 3,100 shares. On the upside, investors are
still putting money to work in fixed income funds, a trend that has
helped TYD jump 15 percent year-to-date.
That does not mean TYD should be held for six or seven months,
but the statistic underscores this ETF's utility in terms of
providing a quick jolt of added upside for a bond portfolio.
For more on leveraged ETFs, click .
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
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