Market volatility appears to increase the demand for two types of exchange trade funds: leverage and inverse.
And Douglas Yones, CEO of Direxion and ETF Money Manager, believes the market situation will continue to drive their demand.
“We have a lot of securities in the market… it’s been going up a lot over the last five or ten years. The market seems to be on the sidelines. We saw the revision on Friday,” he told CNBC’s “ETF Edge” this week. “There are people who say, ‘Hey, I might not want to be completely invested’, but I don’t want to earn capital gains in selling positions. What can I do? I can take long positions with short ETFs.
An ETF, which is the opposite of leverage, gives investors the opportunity to wager monsters in the direction of the stock market. Investors can be longer or shorter.
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Yones’s company is deeply involved in this space. Yones runs Direxion Daily Semiconductor Bull 3X Strains (SOXL). This is one of the biggest leverage/reverse ETFs. According to Factset, Broadcom, Nvidia and Qualcomm are among the top holdings of ETFs.
As the market approaches on Wednesday, Yones ETFs have grown nearly 84% over the past two years, but are off 36% over the past year. It also fell by more than 16% over the past week.
“Volatility is declining as we have headlines that drive the market two or three times a day,” Yohns said. “We think it will be held all year round.”
Vettafi’s Todd Rosenbluth also sees growing demand for single-selling leveraged ETFs.
“Single stock leveraged ETFs probably sound difficult to wrap around the head. But for risk-on or ETF rapper’s reverse risk-off exposure, it’s one stock,” the company’s research head said.
