In this risk-on market, levered themes have gathered inflows along with some outsized YTD returns. Many of today’s levered ETFs are single-stock ETFs focused on high-flying companies such as Palantir. Both the GraniteShares 2X Long PLTR Daily ETF (PTIR) and the Direxion Daily PLTR Bull 2X Shares (PLTU) offer 2X leveraged exposure to the daily performance of Palantir stock and are up 163% this year.
Beyond exposure to single companies, there are also a lot of levered thematic plays available. Investors should consider the risks associated with these approaches, such as higher costs and volatility decay. However, these exchange traded products (ETPs) also offer the potential for significant gains.
Extra Glittery Gold Miners
At the top of the list in terms of performance is the MicroSectors Gold Miners 3X Leveraged ETN (GDXU) which is up more than 170% YTD. Gold mining stocks have been strong performers this year, riding the wave of higher gold prices. They’ve also benefited from investor efforts to counter geopolitical risk as well as tariff- and currency-related volatility. The ETN tracks a VettaFi index. That index provides exposure to a combination of 75% large-cap gold mining stocks and 25% junior (small-cap) gold mining stocks.
Some 2X levered ETFs associated with this theme include the Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG), up 125% YTD and the Direxion Daily Gold Miners Index Bull 2X Shares (NUGT), up 114% this year.
High Flying Aerospace & Defense
Thanks to record defense spending, especially in the area of new defense technologies, the Direxion Daily Aerospace & Defense Bull 3X Shares (DFEN) is another levered thematic delivering lofty returns, gaining 104% YTD. But because it tracks the domestically focused Dow Jones US Select Aerospace & Defense Index, it lacks exposure to many of the soaring European defense names benefiting from the ReArm Europe/Readiness 2030 spending plan.
Consider that the unlevered Select STOXX European Aerospace & Defense ETF (EUAD) is up 79% YTD. This reveals one shortfall of levered ETP products — their inability to efficiently gain exposure to non-US companies. US-traded ADRs or even other ETFs remain an option to help obtain international exposure. However, they are often not liquid enough or tradable for the swap provider.
Leveraging Technology
One of the hottest tech trades last year was the Mag Seven stocks (Nvidia, Microsoft, Amazon, Tesla, Meta, Apple, and Alphabet). Roundhill had great success with its Roundhill Magnificent Seven ETF (MAGS), which now stands at over $2.3 billion in assets under management. It also launched a 2X version of MAGS, the Roundhill Daily 2X Long Magnificent Seven ETF (MAGX), which has raised over $75 million since its February 28, 2024 launch, but is down 5.5% YTD. This raises another important consideration: Levered ETFs can amplify losses as well as gains.
A new levered thematic play recently launched in July on Tidal’s ETF Trust, the 2X Daily Software Platform ETF (SOFL) from AOT Invest. It offers leveraged exposure to software platform companies such as the Mag Seven’s Nvidia, Amazon, Microsoft, Apple and Alphabet. It also holds other top software platforms such as Netflix, Visa, Mastercard, Oracle, SAP, and Alibaba. The portfolio includes 50 names in all.
It is early days for this levered ETF, but software platforms deliver high margins and operating leverage. The ETF offers an interesting way to further leverage this business model.
When it comes to levered ETFS, caveat emptor, or buyer beware. However, there are an increasing number of interesting levered thematic ETFs available to help investors magnify their short-term trading convictions.
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VettaFi LLC (“VettaFi”) is the index provider for GDXU and SOFL, for which it receives an index licensing fee. However, GDXU and SOFL are not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GDXU and SOFL.
