ETF Trends
ETF Trends
  • ETFs that implement derivative financial tools have drawn greater scrutiny from regulators
  • Leveraged and inverse ETFs are being used as trading products over the short-term 
  • Investors are taking both sides of the trade, or long bullish and short bearish positions during market turns

Investors have utilized exchange traded funds that track leveraged and inverse strategies as they were intended, enhancing portfolio positions or capturing a downward trending market.

ETFs that implement derivative financial tools have drawn greater scrutiny from regulators. However, the investment vehicles have been working as intended for more sophisticated investors whom understand the tools. [What The SEC Derivative Proposal Means for Leveraged & Inverse ETFs]

Analysis of market activity for leveraged and inverse ETFs illustrates that the investments have been used properly since they were registered in 2006, serving their intended purpose for suitable investors.

“People are using them the right way,” David Fajardo, Senior Vice President of Direxion Investments, told ETF Trends in a call.

Fajardo pointed out that leveraged and inverse ETFs are being used as trading products over the short-term and are not being used as long-term, buy-and-hold investments. Additionally, investors are taking both sides of the trade, or long bullish and short bearish positions during market turns.

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