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New ETNs Bring Leverage, Spice To Gold Miners

ETF Professor
·2 min read

Gold is hot this year and the miners are even hotter, a scenario bringing more light to the various leveraged exchange traded products that provide access to the companies extracting gold from the earth.

What Happened: In other words, it's a good time for traders to consider some fresh approaches to bullion miners. REX Shares, the issuer behind the MicroSectors lineup of leveraged exchange traded notes, has those traders covered with a pair of new exchange traded notes (ETNs).

The MicroSectors Gold Miners Leveraged 3X ETN (NYSE: GDXU) and the MicroSectors Gold Miners -3X Inverse Leveraged ETN (NYSE: GDXD) launch Thursday, joining well-known products, such as the MicroSectors™ FANG+™ Index 3X Leveraged ETN (NYSE: FNGU) and the MicroSectors™ FANG+™ ETN (NYSE: FNGS) in the MicroSectors stable.

Why It's Important: GDXU and GDXD, the new geared gold ETNs, bring a unique approach. The products track the S-Network MicroSectors™ Gold Miners Index. That benchmark is a combination of the VanEck Vectors Gold Miners ETF (NYSE: GDX) and the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ), the two largest non-leveraged bullion miners ETFs by assets.

The index is half allocated to the large-cap GDX and half allocated to the small-cap GDXJ.

“Each ETN offers investors a return based on changes in the level of the S-Network MicroSectors™ Gold Miners Index on a daily compounded basis, before taking into account fees. Each ETN has a specified leverage factor that is reset daily,” according to MicroSectors.

What's Next: Obviously, as leveraged products, GDXU and the bearish GDXD are expected to pack a punch, but that's certainly the case with these products because, on an unleveraged basis, miners are typically volatile bets.

GDX has a three-year standard deviation of 33.23%, well above that of broader equity benchmarks and standard industry funds.

The small-cap GDXJ has a three-year standard deviation of 38.68%, making it far more volatile than any traditional small-cap benchmark and confirming the MicroSectors ETNs could thrive when action heats up in the miners complex.

With the debuts of GDXU and GDXD, MicroSectors offers over 21 ETNs, spanning FANG stocks, big banks, the energy sector, and the first leveraged cannabis products to list in the U.S.

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