Market Overview

Direxion Rolls Out Leveraged Communication Services ETFs

Direxion Rolls Out Leveraged Communication Services ETFs

Direxion, one of the largest issuers of inverse and leveraged exchange traded funds (ETFs), is branching into the communication services sector.

On Monday, the issuer introduced the first leveraged ETFs aimed at the newly formed sector.

What Happened

The newest additions to Direxion's stable of inverse and leveraged ETFs are the Direxion Daily Communication Services Index Bull 3X Shares (NYSE:TAWK) and the Direxion Daily Communication Services Index Bear 3X Shares (NYSE:MUTE).

The bullish TAWK aims to deliver triple the daily returns of the Communication Services Select Sector Index (IXCTR) while the bearish MUTE looks to deliver triple the daily inverse returns of that index.

Why It's Important

Direxion beat rival ProShares to market with the geared communication services ETFs. ProShares is expected to launch four leveraged communication services this week. Two of the ProShares funds will be bullish and two will be bearish. A pair will be double-leveraged and the other two will be triple-leveraged products.

“The new Communication Services sector reflects what communications means in the 21st century, transforming what was once a defensive area of the market into one that is global, cyclical and growth-oriented,” said Direxion Managing Director David Mazza in a statement. “TAWK and MUTE allow traders to take bold positions on the next evolution of media and communications.”

Goolge parent Alphabet Inc. (NASDAQ: GOOG) and Facebook Inc. (NASDAQ: FB) combine for over 40 percent of the Communication Services Select Sector Index. Netflix, Inc. (NASDAQ: NFLX) is the benchmark's third-largest holding at 4.76 percent.

What's Next

“The Communication Services sector now reflects today’s modern means of facilitating communications and delivering information, broadened to include not just telecom titans such as AT&T Inc. (NYSE: T), but major internet and IT industry players such as Netflix and Facebook,” said Direxion.

As is the case with all leveraged ETFs, MUTE and TAWK are not suitable for all investors and are best deployed as short-term trading instruments, not long-term investments. There can be no guarantees that MUTE and TAWK will fulfill their stated objectives when held for extensive time frames.

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