Market Overview

Leverage Comes To The Robotics Trade

Leverage Comes To The Robotics Trade

While it has cooled a bit after a scorching hot 2017, the artificial intelligence and robotics trade still offers plenty of long-term allure. And short-term traders looking to play a rebound in robotics now have a new option to consider.

The Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares (NYSE: UBOT) debuted Thursday as the first leveraged exchange-traded fund dedicated to artificial intelligence and robotics stocks.

What To Know

The Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares will look to deliver triple the daily returns of the Indxx Global Robotics and Artificial Intelligence Thematic Index. That's the same index tracked by the $2.60 billion Global X Robotics & Artificial Intelligence ETF (NASDAQ: BOTZ), one of the largest robotics ETFs.

UBOT's underlying index “is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence, including companies involved in developing industrial robots and production systems, automated inventory management, unmanned vehicles, voice/image/text recognition, and medical robots or robotic instruments,” according to Direxion.

The fund's expense ratio is 1.22 percent. 

Why It's Important

UBOT comes to market at a time of rapid for traditional robotics ETFs. Last year, the two largest robotics ETFs added more than $2.9 billion in assets combined. That total is north of $1.4 billion to start 2018. The newest non-leveraged robotics ETF, which is two months old, already has about $10.5 million in assets under management.

The Indxx Global Robotics and Artificial Intelligence Thematic Index has annualized volatility of about 10.6 percent, which isn't alarmingly high, but it's enough to potentially stir some significant short-term moves in UBOT.

What's Next

UBOT's underlying index allocates about 86 percent of its combined weight to the industrial and technology sectors with health care stocks contributing 12.7 percent. Well-known stocks that could move UBOT include NVIDIA Corp. (NASDAQ: NVDA) and Intuitive Surgical Inc. (NASDAQ: ISRG), which combine for 17.3 percent of the index's weight.

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