Posted by leekaufman on 5th of Oct 2009 at 12:21 pm
For all you folks that trade Direxions leveraged ETFs, this
change, outlined below in a newsbrief, will NOT have any affect on
leveraged ETF (e.g. FAZ, FAS). I also confirmed this with a
Direxcion representative.
By Ian Salisbury
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--After months of criticism, some mutual
funds that magnify investors' bets on the direction of the stock
market are being scaled back.
On Wednesday, Direxion Funds said its so-called "leveraged"
mutual funds will double investors' bets on the direction of the
stock market on a monthly - rather than a daily - basis.
The change will apply only to Direxion's conventional mutual
funds and not to its exchange-traded funds that, along with those
from Bethesda, Md.-based ProShares ETFs, have provoked the most
controversy.
Leveraged mutual funds and ETFs, which have collected billions
of dollars in the past few years, use complex investments like
swaps and futures contracts to give investors a more convenient
alternative to moves like trading stocks on margin or short
selling.
For example, on a day when the stock market rises 1%, a
triple-leveraged long fund might rise 3%, while a leveraged short
fund would fall 3%.
While such tools appeal to a wide range of investors, many use
them to make bets that last longer than a single day. In that case,
results can be disappointing, especially in volatile markets when
compounding daily returns tend to work against fund investors.
For instance, while the Russell 2000 was up about 2.6% over the
first six months of the year, the effect of daily compounding meant
the Direxion Daily Small Cap 3X Bull ETF was not up 7.8%, but down
about 21% during that span.
Funds that aim for monthly rather than daily returns could still
produce similar discrepancies, but the longer time frame would give
investors more time to react.
Andy O'Rourke, head of marketing at Direxion, says the funds'
new goal may be a "better fit" for investment managers using
leveraged mutual funds to hedge other bets or get exposure to a
certain slice of the market over the medium term. Day traders may
continue to favor the ETFs.
-By Ian Salisbury, Dow Jones Newswires; 212-416-2241;
ian.salisbury@dowjones.com
Glad to hear it, since that would be quite a nuisance as far as
backtesting goes. And good point about verifying information first.
By the way, did anyone hear? Bill Gates is giving away his fortune!
... :)
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Direxion Leveraged ETFs - No Changes
Posted by leekaufman on 5th of Oct 2009 at 12:21 pm
For all you folks that trade Direxions leveraged ETFs, this change, outlined below in a newsbrief, will NOT have any affect on leveraged ETF (e.g. FAZ, FAS). I also confirmed this with a Direxcion representative.
NEW YORK (Dow Jones)--After months of criticism, some mutual funds that magnify investors' bets on the direction of the stock market are being scaled back.
On Wednesday, Direxion Funds said its so-called "leveraged" mutual funds will double investors' bets on the direction of the stock market on a monthly - rather than a daily - basis.
The change will apply only to Direxion's conventional mutual funds and not to its exchange-traded funds that, along with those from Bethesda, Md.-based ProShares ETFs, have provoked the most controversy.
Leveraged mutual funds and ETFs, which have collected billions of dollars in the past few years, use complex investments like swaps and futures contracts to give investors a more convenient alternative to moves like trading stocks on margin or short selling.
For example, on a day when the stock market rises 1%, a triple-leveraged long fund might rise 3%, while a leveraged short fund would fall 3%.
While such tools appeal to a wide range of investors, many use them to make bets that last longer than a single day. In that case, results can be disappointing, especially in volatile markets when compounding daily returns tend to work against fund investors.
For instance, while the Russell 2000 was up about 2.6% over the first six months of the year, the effect of daily compounding meant the Direxion Daily Small Cap 3X Bull ETF was not up 7.8%, but down about 21% during that span.
Funds that aim for monthly rather than daily returns could still produce similar discrepancies, but the longer time frame would give investors more time to react.
Andy O'Rourke, head of marketing at Direxion, says the funds' new goal may be a "better fit" for investment managers using leveraged mutual funds to hedge other bets or get exposure to a certain slice of the market over the medium term. Day traders may continue to favor the ETFs.
-By Ian Salisbury, Dow Jones Newswires; 212-416-2241; ian.salisbury@dowjones.com
I didn't think so...
Posted by burkmere on 5th of Oct 2009 at 12:26 pm
I didn't think so as my FAS is trading 3 times the percentage gain in xlf real time.
Thanks for clarifying and a slight "admonishment" for those of you who had this info wrong. It's important to get your info right on here....
If you are unsure, say you are unsure or resarch it some more...
Thanks!!
Glad to hear it, since
Posted by user32 on 5th of Oct 2009 at 12:33 pm
Glad to hear it, since that would be quite a nuisance as far as backtesting goes. And good point about verifying information first. By the way, did anyone hear? Bill Gates is giving away his fortune! ... :)