Despite all the scrutiny on leveraged ETFs, some manage to fly
under the radar. For every leveraged fund that is as well known
as the Direxion Daily Financial Bear 3X Shares (NYSE:
FAZ
), there is another that most investors do not even know
exists.
Anonymity aside, the allure of leveraged ETFs is obvious. Few
other financial instruments offer ordinary investors the chance
to capture double-digit gains in just one or two trading days.
However, many investors are seduced by those gains and fail to
read the fine print: leveraged ETFs are short-term trading
vehicles, not buy-and-hold investments.
For those with discipline and a sense of adventure, the
following forgotten leveraged ETFs have the potential to be quite
rewarding in the current market environment.
ProShares Ultra DJ-UBS Natural Gas (NYSE:
BOIL
)
Aided by a bullish demand outlook and some cooperative weather
forecasts, natural gas futures have been moving higher lately.
After touching support at $15 earlier this month, the U.S.
Natural Gas Fund (NYSE:
UNG
) has rallied to over $18.60. UNG itself often moves like a
leveraged ETF (only a slight exaggeration), but those who want
really big moves should consider the ProShares Ultra DJ-UBS
Natural Gas.
In the past seven weeks, BOIL has had days where it has gained
9 percent, 6 percent, 10.5 percent and 27.1 percent.
ProShares UltraShort Utilities (NYSE:
SDP
)
Many investors know of the inverse funds for sectors such as
energy, financial services and technology, but many would also be
surprised to learn there's a leveraged bearish play on utilities
stocks. Thank goodness there is because
the Utilities Select Sector SPDR (NYSE:
XLU
) is showing signs of weakness.
The knock on the ProShares UltraShort Utilities is the weak
average daily trade volume of just 3,200 shares. Note that the
index SDP offers daily inverse returns on is the index tracked by
the iShares Dow Jones U.S. Utilities Sector Index Fund (NYSE:
IDU
), not XLU. That means SDP's returns should be measured against
the iShares offering, not XLU.
Direxion Daily Healthcare Bear 3X Shares (NYSE:
SICK
)
The Direxion Daily Healthcare Bear 3X Shares clearly has a nifty
ticker, but this ETF's time to shine could arrive as soon as
Thursday. That is when the U.S. Supreme Court is expected to
finally render a decision on Obamacare. Should that ruling
adversely impact health care stocks and ETFs, SICK could see a
brief surge in popularity.
As it is, the fund only trades about 400 shares per day,
according to Yahoo Finance data. SICK has a bullish equivalent in
the form of the Direxion Daily Healthcare Bull 3X Shares (NYSE:
CURE
). Both follow the same index as the Health Care Select Sector
SPDR (NYSE:
XLV
).
Direxion Daily Natural Gas Related Bear 3x ETF (NYSE:
GASX
)
It might seem odd to have one bullish natural gas play on this
list and then follow up it with a bearish play. However, BOIL is
a play on natural gas futures while the Direxion Daily Natural
Gas Related Bear 3x ETF is a bearish play on natural gas
equities. Natural gas equities have lagged the returns offered by
futures. In the past month, the First Trust ISE Revere Natural
Gas ETF (NYSE:
FCG
) has fallen 5.8 percent while UNG is up 2.6 percent.
GASX tracks the same index as FCG and the former has surged
7.3 percent since May 29. Its bullish equivalent is the Direxion
Daily Natural Gas Related Bull 3x ETF (NYSE:
GASL
).
For more on leveraged ETFs, click
here
.
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