New Inverse ETFs For Bearish Sector Traders
Direxion, the second-largest issuer of inverse and leveraged exchange traded funds, has extensive lineup of sector and industry ETFs risk-tolerant traders can use to establish bearish views. For example, the issuer is the force behind popular bearish leveraged ETFs such as the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) and the Direxion Daily Energy Bear 3X Shares (Direxion Shares Exchange Traded Fund Trust (NYSE: ERY)).
But sometimes traders like the idea of being bearish without the idea of being leveraged. A trio of inverse-though-not-leveraged new ETFs from Direxion help with that objective. On Thursday, the issuer introduced the Direxion Daily Energy Bear 1X Shares (Direxion Shares ETF Trust (NYSE: ERYY)), Direxion Daily Financial Bear 1X Shares (Direxion Shares ETF Trust (NYSE: FAZZ)) and the Direxion Daily Technology 1X Bear Shares (NYSE: TECZ).
ERYY, the inverse energy ETF, will attempt to deliver the daily inverse performance of the S&P Energy Select Sector Index on a percent-for-percent basis. FAZZ will seek to do the same with the S&P Financial Select Sector Index while TECZ will do the same with the equivalent S&P Technology Select Sector Index.
Direxion's inverse-though-not-leveraged lineup also includes a total market offering, several bearish bond funds, the only way to short China A-shares via a U.S.-listed ETF and the Direxion Daily S&P Biotech Bear 1X Shares (NYSE: LABS).
FAZ rose to acclaim and controversy during the financial crisis and with the financial services sector struggling again this year FAZ and the new FAZZ could be options to consider for tactical traders. FAZ is higher by 9.6 percent year-to-date.
Due in part to the fact that they are not leveraged ETFs, ERYY, FAZZ and TECZ cost less than their leveraged counterparts. Though these ETFs are not designed to be long-term investments, ERYY, FAZZ and TECZ each charge 0.45 percent per year. Leveraged equivalents usually cost more than double that.
Traders betting on ERYY are, in essence, making a bet against Dow components Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX), because the two largest U.S. oil companies combine for over 30 percent of that ETF's underlying index. Likewise, TECZ can be used as a hedge on a long position in Apple Inc. (NASDAQ: AAPL), because the iPad maker figures prominently in the S&P Select Sector Technology Index.
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