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6 Inverse Leveraged ETFs Up Over 50% YTD

Zacks Equity Research

The bear ETF world got a sudden spike to start 2016 thanks to heightened volatility and uncertainty in the broader market. Surprisingly low oil prices due to the liftoff of the Western Sanctions against Iran that ensures more supplies in the global market amid falling demand has played a huge role in the market movement so far this year. Also, hard landing fears in the world’s second largest economy China dampened the market mood (read: Oil Hits 12-Year Low: Short Energy Stocks with ETFs).


Almost all regular risk-on investments are in red this year while bear products are in the green. Needless to say, inverse leveraged exchange traded products piled up solid gains as investors rushed to such products to magnify returns and make the most of this bear market.


So for investors seeking to ride the current trend, we have highlighted six inverse leverage products that have surpassed the market so far in 2016 albeit with greater volatility. This trend might continue at least for the near term if global sentiments remain equally unsteady.

However, investors should note that these funds run the risk of huge losses compared to traditional funds in a fluctuating market. Also, once the market sentiment improves, these bear funds will see a downfall. Thus such products are suitable only for short-term traders.


Additionally, the daily rebalancing – when combined with leverage – may force these products to deviate significantly from the expected long-term performance figures (see: all Inverse Equity ETFs here).

 

Direxion Daily S&P Biotech Bear 3x Shares (LABD) – Up 87.8%

 

Biotech investing has been see-sawing on pains and gains since last year. While the space holds promise for the long term, occasional meltdown on overvaluation concerns and over the pricing issue on life-saving drugs are persistent problems. Also, the space succumbs to a correction when the broader market hits any growth-related bump and a risk-off trade sentiment takes over.

 

This product seeks to deliver thrice (3x or 300%) the inverse (opposite) daily performance of the S&P Biotechnology Select Industry Index. The fund has amassed $24.0 million in its asset base and its average daily volume is more than 632,000 shares. It charges investors 95 bps in annual fees and expenses. The ETF has delivered stellar returns of 87.8% so far this year (as of January 15, 2016) (read: Guide to Inverse & Leveraged Biotech ETF Investing).

 

Direxion Daily Natural Gas Related Bear 3x Shares (GASX) – Up 86.9%

 

The broader oil market rout has spilled over to the natural gas corner of the energy market. Plus, a warmer winter in the northern hemisphere this year has dampened the seasonal demand for natural gas which in turn has marred prices.


This product provides three times inverse exposure to the natural gas segment of the equity market, which tracks the ISE-Revere Natural Gas Index. It has amassed $9.0 million in its asset base while volume is paltry at around 8,000 shares. Expense ratio comes in at 0.95%. GASX is up 86.9% so far this year.         

 

VelocityShares 3x Inverse Crude ETN (DWTI) – Up 82.8%

 

Now what could be said about crude? It’s all about fall in prices. No doubt, an inverse leverage crude ETN will a get a place in the top performers’ list.


This product provides three times inverse exposure to the daily performance of the S&P GSCI Crude Oil Index Excess Return. The ETN is a bit pricey as it charges 1.35% in annual fees while average daily volume is solid at 1.4 million shares. It has managed $575.6 million in its asset base and has surged 82.8% in the year-to-date frame.

 

Direxion Daily FTSE China Bear 3x Shares (YANG) – Up 59.8%


Next comes another dampener of the global market – China. Six-year low GDP growth in the fourth quarter of 2015, a prolonged slowdown in the manufacturing sector and credit crunch issues are all weighing down on the Chinese market.  


This fund provides thrice the inverse return of the FTSE China 50 Index. The product has AUM of around $74.1 million and sees good trading volume of 251,000 shares a day on average. Expense ratio of the fund is 0.95%. YANG has retuned nearly 60% so far this year (read: China Crash Spoils New Year Mood: ETFs in Focus).


Direxion Daily Homebuilders &Suppliers’ Bear 3X ETF (CLAW) – Up 58.5%


Though the space is in decent shape, disappointing fourth-quarter and fiscal 2015 earnings from one of the nation's largest homebuilders KB Home has spread anxiety.

The fund provides three times inverse exposure to the Dow Jones U.S. Select Home Construction Index. It has amassed $6.5 million in its asset base while volume is paltry at around 600 shares a day. Expense ratio comes in at 0.95%. CLAW is up 58.5% so far this year.  

 

Direxion Daily Russia Bear 3X ETF (RUSS) – Up 55%

 

Russia is yet another victim of oil crash. In any case, the economy has been suffering from the Western sanctions and sky-high inflation. Now, subdued oil prices and a stronger U.S. dollar on the Fed liftoff has put more pressure on the Russian currency ruble (read: 4 Country ETFs to Shun if Oil Hits $20).

 

This $37.3-million fund also gives triple leverage inverse exposure to the Market Vectors Russia Index. The fund trades in solid volume of 400,000 shares a day. It charges 95 bps in fees and has gained 55% so far this year.

 


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DIRX-D SP BBEAR (LABD): ETF Research Reports
 
DIR-D NG BR3X (GASX): ETF Research Reports
 
VEL-3X INV CRD (DWTI): ETF Research Reports
 
DIR-D F CHIN BR (YANG): ETF Research Reports
 
DIR-D HB&SP BR3 (CLAW): ETF Research Reports
 
DIRX-D RUS BR3X (RUSS): ETF Research Reports
 
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