Investors have received the memo that the FANG stocks — Facebook Inc. (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Netflix INc. (NASDAQ: NFLX) and Alphabet Inc (NASDAQ: GOOG) — have been decimated this week.
For their parts, Alphabet and Amazon have been jettisoned from the $1 trillion club and while that will likely prove to be a temporary exclusion, there's no getting around recent FANG weakness.
Of course, bearish plays on the technology and communication services sectors have been working and the one that's dedicated to shorting FANG, the MicroSectors FANG+ Index -3X Inverse Leveraged ETN (NYSE: FNGD), is really working.
FNGD entered Friday with a gain of 52.5% over the past week. The inverse exchange traded note follows the NYSE FANG+TM Index, which “includes 10 highly liquid stocks that represent industry leaders across today’s tech and internet/media companies,” according to the issuer. “The index is equally weighted, providing a unique performance benchmark that offers investors a value-driven approach to technology investing. Unlike market capitalization weighted indices, which can be dominated by a few large stocks, an equal-weighted index offers for a more diversified portfolio.”
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Why It's Important
For the uninitiated, FNGD may be flying under the radar relative to other bearish ETFs, but its average daily volume is decent at over 628,000 shares and at time of writing Friday afternoon, the turnover in the ETN is roughly triple the daily average.
There are other signs of increased demand for FNGD. MicroSectors parent REX Shares earlier this week upsized FNGD by another $100 million to accommodate more traders. That's the sixth upsizing of the product since it debuted in January 2018.
“Despite a strong tech-led rally to start 2020, we’ve seen a considerable pullback in the equity markets. Investors, seeking a hedge against the recent volatility, have turned to the short -3X FANG ETN (FNGD),” said Scott Acheychek, President of REX Shares. “The increase in demand for FNGD has led to another upsizing event – marking the sixth time our partners at BMO have increased the number of notes outstanding since launch.”
If the coronavirus issue ebbs and the long-awaited V-shaped recovery materializes, it's reasonable to expect that FNGD will be punished.
Fortunately, REX Shares addresses the potential for that event with FNGD's bullish counterpart, the MicroSectors FANG+ Index 3X Leveraged ETN (NYSE: FNGU). Underscoring its potential for big gains or losses in short time frames, FNGU is lower by 45% this week.
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