Leveraged and inverse exchange traded funds are growing in popularity among technical traders who capitalize on short-term moves.
“Leveraged miner ETF inflows are more technical in nature, coming from program traders,” David Fajardo, Senior Vice President of Direxion Investments, told ETF Trends in a call.
For instance, Fajardo pointed out that in recent weeks when the Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST), which takes the -3x or -300% daily performance of the NYSE Arca Gold Miners Index, plunged on the rally in gold miners, the inverse ETF experienced millions of creations as institutional technical traders tried to catch the falling knife, betting on a reversal on the current uptrend.
Over the past month, DUST declined 30.5% but saw $111.1 million in net inflows, according to ETF.com.
In contrast, the Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT), the 3x bullish counterpart to DUST, saw $148.9 million in outflows after jumping 20.8% over the past month.
We are seeing tactical bets on leveraged and inverse gold miner ETFs as investors try to time a bottom or trim holdings once the segment grows long in the tooth.
Traders have also taken a similar interest in junior or more smaller gold miners. For instance, the Direxion Daily Junior Gold Miners Index Bull 3x Shares (NYSEArca: JNUG), which takes the 3x or 300% daily performance of the Market Vectors Junior Gold Miners Index, saw $13.0 million in outflows over the past month as the fund surged 47.7%.
On the other hand, the Direxion Daily Junior Gold Miners Index Bear 3X Shares (NYSEArca: JDST), the inverse 3x counterpart to JNUG, attracted $29.2 million in inflows in the past month as the ETF plunged 45.2%.
ETF traders who are uncomfortable with the riskier 3x products can also track the miner space with a smaller 2x leverage. For example, the ProShares Ultra Gold Miners (NYSEArca: GDXX) and ProShares Ultra Junior Miners (NYSEArca: GDJJ) take the 2x or 200% daily performance of NYSE Arca Gold Miners Index and Market Vectors Global Junior Gold Miners Index, respectively.
The double-leveraged inverse versions of GDXX and GDJJ include the ProShares UltraShort Gold Miners (NYSEArca: GDXS) and the ProShares UltraShort Junior Miners (NYSEArca: GDJS).
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