5 Leveraged/Inverse ETFs Up 25% Plus At Halfway Q3

Though Wall Street was off to a solid start in the third quarter on hopes of monetary easing globally and trade optimism, it got caught in a nasty web of woes lately triggered by U.S.-China trade conflicts, low inflation, political unrest in Hong Kong as well as a plunge in Argentina's currency and stock markets.

These have reignited worries over the global slowdown and resulted in a steep fall in global yields. Notably, the U.S. Treasury yield curve temporarily inverted for the first time since June 2007 as 10-year yields broke below 2-year yields, signaling that the world’s biggest economy could be heading for a recession. As such, investors fled to safety toward gold and Treasuries.

Against this backdrop, investors are rushing to leveraged or inverse leveraged ETFs to increase returns on quick market turns in a short span. These products either create a leveraged long/short position, an inverse long/short position or a leveraged inverse long/short position in the underlying index through the use of swaps, options, future contracts, and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time provided the trend remains a friend.

However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performances could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).

Still, we have highlighted five leveraged/inverse products that have gained more than 25% at halfway Q3 though these involve a great deal of risk when compared to traditional products. This trend might continue at least in the near term provided the sentiments remain the same.

Direxion Daily Natural Gas Related Bear 3X Shares (GASX - Free Report) – Up 80.2%

This product provides three times (3x) inverse exposure to the ISE-Revere Natural Gas Index. It has amassed $5.6 million in its asset base and trades in solid volume of 25,000 shares a day on average. The ETF charges 95 bps in fees per year.

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