While remembering the familiar advice that inverse and leveraged exchange traded funds are not suitable for all investors and that these ETFs are best used over short-term time frames by active traders with the ability to closely monitor their positions, it is worth noting that some leveraged ETFs are currently doing their jobs.
And doing those jobs. The current environment of rapid deterioration in gold and oil prices has some leveraged ETFs, at least for now, printing cash. That is not the problem. Nor is the realization that if commodities prices snap back in a hurry, the ETFs to be highlighted here will be imperiled. [Leveraged ETFs That are Working]
Rather, the issue is that many investors have not been taking advantage of some prime trading opportunities in select leveraged ETFs, particularly those of the inverse or bearish variety.
Start with bearish leveraged gold ETFs. It might seem logical to think that with over $1.1 billion being pulled from the SPDR Gold Shares (NYSEArca: GLD) last month that traders are scurrying to bearish gold ETFs.
If “scurrying” qualifies as combined fourth-quarter inflows of $6.8 million to the ProShares UltraShort Gold (NYSEArca: GLL) and the PowerShares DB Gold Double Short ETN (NYSEArca: DZZ), then “scurrying” has occurred.
The scenario with inverse gold ETFs is not unusual. As we have recently reported, traders have been putting new money to in bullish leveraged gold miners ETFs while pulling money from the Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST) and the Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEArca: JDST). Problem is JDST and DUST are the two best leveraged ETFs over the past month. [More Losses for Gold Miners ETFs]