WHILE CORPORATE AMERICA DELEVERAGES….
While corporate America deleverages, the investing public gets a chance to increase their leverage.
Read the following:
A new filing by Direxion Funds could seriously up the ante in the realm of leveraged exchange-traded funds. The firm, which is known for its leveraged index mutual funds, has filed 36 proposed ETFs with the Securities and Exchange Commission.
There’s been a lot of activity in the leveraged funds market lately, but these funds take the concept to the next level - they offer THREE TIMES the performance (or three times the inverse) of the daily performance of the indexes they are tied to. This means that the proposed Direxion S&P 500 Bear 3X Shares, for example, will offer three times the inverse of the daily performance of the S&P 500. Currently, available ETFs offer no more than double exposure to their underlying indexes, whether they be leveraged or inverse funds. (www.indexuniverse.com)
This is a unique way for the ETF world to skirt the 50% equity margin rules. Imagine buying an index (SPX) on 3x leverage, on 50% margin. That gives you 6x leverage. Can you here the retail broker sales pitch? What a saleable but dangerous product this is in the hands of those not skilled in risk management.
I, for one, do not endorse such leverage in general. I have always thought such.
3 years ago • Notes