Market Overview

To The Cloud For Leverage As Direxion Launches First Geared Cloud Computing ETFs

To The Cloud For Leverage As Direxion Launches First Geared Cloud Computing ETFs

Investors looking for a scorching hot corner of the technology sector need not look much further than cloud computing stocks and the related exchange traded funds.

What Happened

As is often said, where there's a hot theme, an ETF isn't far behind. That's true with cloud computing as there are several established funds in this space. So that means the next frontier is leveraged funds.

Direxion, one of the largest issuers of geared ETFs, obliged last week with launches of double-leveraged bullish and bearish cloud funds.

Why It's Important

The Direxion Daily Cloud Computing Bull 2X Shares (NYSE: CLDL) looks to deliver double the daily returns of the Indxx USA Cloud Computing Index while the Direxion Daily Cloud Computing Bear 2X Shares (NYSE: CLDS) seeks returns that are double the daily inverse performance of that index.

“The Indxx USA Cloud Computing Index provides exposure to domestic companies that deliver cloud computing infrastructure, platforms, or services. The companies included in the Index are involved in the delivery of computing services – servers, storage, databases, networking, software, analytics, and more, over the internet, which is often referred to as the 'Cloud,'” according to Direxion.

The largest components in the benchmark include Twilio (NYSE: TWLO), AutoDesk (NASDAQ: ADSK), ServiceNow (NYSE: NOW) and Paycom Software (NYSE: PAYC). That quartet combines for 24% of the index CLDL and the bearish CLDS track.

What's Next

Direxion has an expansive lineup of leveraged sector ETFs, many of which are popular with aggressive, short-term traders. The issuer also offers some geared industry ETFs, several of which are hits with traders, such as gold miners and biotechnology offerings.

It remains to be seen of CLDL and CLDS can follow that trajectory, but the funds could prove well-timed as cloud spending is forecast to continue soaring for several years.

“Cloud computing has proven to be one of the most successful trading themes of 2020. We’re very excited to offer traders leveraged exposure to express bullish or bearish positions on this high growth industry,” said Dave Mazza, Managing Director at Direxion. “These Leveraged ETFs allow traders to take a bold position in stocks that are critical as the virtual computing world expands exponentially.” 


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