Traders Bet on new Leveraged Biotech ETFs

Biotechnology exchange traded funds swooned in late June, but those losses and more have since been recovered as Tuesday’s ETF all-time high list was heavily populated by biotech funds.

To be precise, 27 ETFs made new highs yesterday and eight were biotech funds. Of those eight, three were the three leveraged bullish biotech funds: The ProShares Ultra Nasdaq Biotechnology (NasdaqGM: BIB) and the newly minted, triple-leveraged funds, the Direxion Daily S&P Biotech Bull Shares (NYSEArca: LABU) and the UltraPro NASDAQ Biotechnology (NasdaqGM: UBIO). [More Leveraged Biotech ETFs Debut]

Despite concerns that biotech stocks remain excessively valued and vulnerable to sharp pullbacks, traders are embracing the aforementioned leveraged biotech ETFs at a decent clip. For the three weeks ending July 13, traders added nearly $27 million to BIB. BIB attempts to deliver twice the daily returns of the NASDAQ Biotechnology Index, the underlying index for the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech ETF by assets.

BIB had $808.2 million in assets at the end of the first quarter, according to ProShares data, but that number is now approaching $830 million.

LABU, the first triple-leveraged bullish biotech ETF to come to market, added $37.3 million from June 23 through July 13. That is not a massive number, but it is still a solid haul for an ETF that is less than two months old. The ETF needed just three trading days to eclipse $8 million in assets under management.

LABU attempts to deliver three times the daily returns of the S&P Biotechnology Select Industry Index. The S&P Biotechnology Select Industry Index is the underlying benchmark for the well-known SPDR S&P Biotech ETF (NYSEArca: XBI), the third-largest biotech ETF by assets. [More to Come for Biotech ETFs]