First, the necessary disclaimer that leveraged exchange-traded funds should not be held for weeks or months on end. The long a leveraged ETF, the odds increase it will deviate from its underlying investment objective, potentially leaving traders with unpleasant surprises.
There are times when some leveraged ETFs soar for extended periods of time and that has been happening this month for a trio of previously downtrodden leveraged energy funds.
Prime example: the Direxion Daily Natural Gas Related Bull 3X Shares (NYSE: GASL). GASL tries to deliver triple the daily returns of the ISE-Revere Natural Gas Index. There's a plain vanilla ETF that's linked to that index and that fund has been a value destroyer for a decade or more, but every dog has its day.
Even with a loss of nearly two-thirds of a percent on Monday, GASL is up more than 30% this month, making it the best-performing leveraged ETF in the Direxion suite.
Hot on GASL's tail is the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares (NYSE: GUSH) another volatile that ebbs and flows with oil prices. Thanks to an attack on major Saudi Arabian oil assets earlier this month, ETFs like GASL and GUSH are soaring in September.
GUSH, which attempts to deliver triple the daily returns of the S&P Oil & Gas Exploration & Production Select Industry Index, is higher by almost 27% month-to-date. Reminding investors just how volatile exploration and production stocks can be, GUSH plunged more than 20% last week on news that the Saudis may be able to restore some of that lost production quicker than expected.
And speaking of volatility, GASL and GUSH have been the most volatile leveraged bullish ETFs in Direxion's stable over the past 30 days and it's not even close.
Docile compared to GASL and GUSH, the Direxion Daily Energy Bull 3X Shares (NYSE: ERX) is up just over 23% this month. That fund tries to deliver triple the daily returns of the Energy Select Sector Index, making it a levered play on integrated oil companies.
ERX is indeed docile compared to the other funds mentioned here as it is not among the 10 most volatile Direxion bullish leveraged ETFs this month.
What's interesting about ERX, GASL and GUSH this month, aside from their returns, is that issuer data indicate there have not been notable inflows into those products. Rather, recent data confirm some of their bearish equivalents have been adding assets, perhaps a sign traders are betting energy ebullience will be short-lived.
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