Wednesday, November 26, 2008

3X ETF's On Fire

We mentioned the introduction of these beasties in our Nov. 4 post "Action Baby, Action: "Leveraged ETFs With 300% Exposures Set To Launch"'.

Today Bespoke looks at their first three weeks of trading. Our Nov. 4 headline was too subdued.
From Bespoke Investment Group:
Since 2x ETFs, which give investors twice the returns of the underlying index, weren't enough for profit-hungry traders, Direxion released 3x ETFs earlier this month that track the Russell 1,000, Russell 2,000, and Energy and Financial sectors. These ETFs try their hardest to achieve 3 times the daily change (straight up and inverse) of the indices they track. Below we highlight the eight 3x ETFs that have been released by Direxion so far....

...Although they've been trading for less than a month, the 3x ETFs have already become very popular trading vehicles. And with a market that is averaging a daily change of nearly 4%, these ETFs have already taken traders for a wild ride. Below we highlight price and volume charts of the 3x long and inverse Russell 1,000 and Financial ETFs. As shown, volume has picked up significantly in recent days for all of these 3x ETFs, reaching 10,000,000+ shares per day in some instances.

But the percentage change in these ETFs is what is really crazy. The inverse 3x Russell 1,000 ETF (BGZ) has already had a rally of 114% and a decline of 42% since trading began on November 5th! The Financial ETFs have been even crazier. The 3x long Financial ETF (FAS) declined 80% from its high on 11/10 to its low last Friday. Since then, it's already up 127%! The inverse one has been even crazier. From 11/6 to its high last Friday, FAZ went from $60 to $200 (235%). Since then, it has gone from $200 back down to $70 (-67%)....

Read the whole thing and check out B.I.G's always wonderful charts.