Friday, May 27, 2011

Direxion Unveils +/- 3x Versions of Market Vectors Agribusiness ETF (MOO; COWL; COWS)

All you have to do is be right (or short both sides).
From Benzinga:
Direxion rolled out four new ETFs yesterday (5/25/11) providing +3x and -3x leveraged exposure to existing ETF offerings from Van Eck Market Vectors.  This is not the first time Direxion has taken this path, having added leverage to the Market Vectors Gold Miners ETF (GDX) last December.

Direxion Daily Agribusiness Bull 3x Shares (COWL) and Direxion Daily Agribusiness Bear 3x Shares (COWS) track the same DAXglobal Agribusiness Index as the unleveraged Market Vectors Agribusiness ETF (MOO) (MOO overview).  COWL provides +300% the daily return while COWS provides -300% (three times the inverse) the daily return.  The new ETFs hold swaps on the performance of MOO and have their expense ratios capped at 0.95%.

The underlying index has current sector exposures of Materials 48.0%, Consumer Staples 35.0%, and Industrials 17.0%.  Country weightings include U.S. 47.9%, Singapore 10.5%, Canada 10.0%, Switzerland 7.5%, and Germany 4.4%.  The COWL/COWS combined fact sheet (pdf) provides additional background on the funds, while the COWL overview and COWS overview contain links to other material....MORE
On the joys of shorting ETF pairs:

April '09 
Direxion 3x Financial ETFs Go Certifiably Crazy (FAS; FAZ etc.)
...One approach is to short both of them, in effect writing an option. Ooops, have I said too much?

June '09 
FAS and FAZ: A Short Seller's Dream?

Sept. '09 
Shorting Leveraged ETF Pairs (FAS, FAZ: SPXU, UPRO)

Oct. 2010 
UPDATED: "Shorting Leveraged ETF Pairs (FAS, FAZ: SPXU, UPRO)"
...Here are the results of the strategy since that first post, via BigCharts:

Cool huh? One short goes against you 60% while the other goes in your favor 90%. 
If only they had 6X leveraged ETF's! You'd get 4% per month (approximate, it depends on the implied volatility of the options) on a mirror image pair trade as the rebalancing scrapes off the time premium of the options in the ETF....
Feb. 2011 
"Shorting Leveraged ETF Pairs" (FAS; FAZ; QLD; QID)