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Another Russia Controversy Sparks Activity In These ETFs

April 13, 2018 2:03 pm
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Another Russia Controversy Sparks Activity In These ETFs

Russian stocks and the corresponding exchange traded funds have been in the spotlight recently as the country continues its support of controversial Syrian President Bashar al-Assad. Russia ETFs were punished after al-Assad reportedly ordered a chemical attack in the Syrian town of Douma, which prompted stern Twitter rhetoric from President Trump aimed at al-Assad and Russia. 


Perhaps not surprisingly, the latest geopolitical controversy involving the U.S. and Russia is stirring activity in the Direxion Daily Russia Bull 3X Shares (NYSE:RUSL) and the Direxion Daily Russia Bear 3X Shares (NYSE:RUSS). RUSL is designed to deliver triple the daily returns of the MVIS Russia Index while RUSS attempts to deliver triple the daily inverse returns of that benchmark.


Familiar Reminders


It is often said, leveraged ETFs are meant to be short-term trades, not long-term investments. RUSL and RUSS prove as much. RUSL, the triple-leveraged bullish fund, is down more than 31.5 percent over the past week while the bearish RUSS is up 28.3 percent over the same period.


In other words, Russian stocks can be and often are volatile. The index RUSL and RUSS track prove as much. That benchmark's three-year standard deviation is almost 19.6 percent, or more than 300 basis points above the comparable metric on the MSCI Emerging Markets Index.


The pair of leveraged Russia ETFs also offer plenty of exposure to rebounding oil prices. With Brent crude trading at multi-year highs, RUSL could be worth considering for traders wagering on more oil upside because the MVIS Russia Index devotes over 39 percent of its weight to energy stocks, reflecting Russia's status as the world's largest oil producer.


Traders Are Responding


Heightened geopolitical tensions and rising oil prices are luring traders to RUSL and RUSS. For the five days ended April 10, volume in the bullish RUSL was more than 122 percent above the trailing 20-day average, according to Direxion data. Volume in RUSS was nearly 37 percent over the same period.


Data also suggest some traders are betting on a rebound in Russian stocks as RUSL has averaged daily inflows of nearly $174,000 over the past month.


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