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Don't Get SICK Of Healthcare ETFs And Stocks; Try This Instead

ETF Professor

The volatility of the healthcare sector, much of which can be tied to election year rhetoric, has been well-documented. After performing as a consistent sector leader throughout much of the current bull market, healthcare is the worst-performing group in the S&P 500 this year.

With all that volatility, some traders may not want to trade the stocks themselves. For aggressive, risk-tolerant traders, leveraged exchange traded funds such as the Direxion Daily Healthcare Bull 3X Shares (NYSE: CURE) and the Direxion Daily Healthcare Bear 3X Shares (NYSE: SICK) present a good trading opportunity

CURE attempts to deliver triple the daily returns of the S&P Health Care Select Sector Index while SICK seeks to deliver triple the daily inverse returns of that index. That index features exposure to pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology firms, according to Direxion

Leveraged ETFs, such as CURE, or a leveraged inverse fund like SICK, offer traders “the ability to hedge or potentially capture gains from index movements triggered” by earnings events, notes Direxion

If year-to-date flows data are an accurate gauge, then SICK might be the better short-term idea, as investors have yanked nearly $1.3 billion from the non-leveraged ETF that tracks the same index as CURE and SICK.

Of course, there is still some time left before Election Day and that could impact the healthcare sector, putting the spotlight on the likes of CURE and SICK.

“As the presidential election looms closer, it is likely that these concerns and headlines will not go away anytime soon. Thus it makes sense why there may be concern about additional potential downside in the sector,” said Street One Financial Vice President Paul Weisbruch in a recent note. 

For a targeted hedge on long healthcare exposure, traders that are long biotech stocks or ETFs can also consider considthe inverse, though not leveraged, Direxion Daily S&P Biotech Bear 1x Shares. (NYSE: LABS).

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