While the U.S. markets were moving toward one of their worst weeks since the financial crisis, more aggressive exchange traded fund traders are loading up on leveraged strategies to capitalize on a potential rebound once equities turn around.
For example, the ProShares UltraPro QQQ (NasdaqGM: TQQQ) was one of the most popular ETF plays over the past week, attracting $457 million in net inflows, according to ETFdb data.
The ProShares UltraPro QQQ tries to reflect the daily investment results that correspond to three times daily performance of the NASDAQ-100 Index. The fund invests in financial instruments that ProShare Advisors believes, in combination, should produce daily returns consistent with the fund’s investment objective. The index includes 100 of the largest domestic and international non-financial companies listed on The Nasdaq Stock Market based on market capitalization.
Additionally, the Direxion Daily Semiconductor Bull 3X ETF (NYSEArca: SOXL) was another popular leveraged bullish play over the past week, bringing in $158 million in net inflows.
The Direxion Daily Semiconductor Bull 3X ETF seeks daily investment results, before fees and expenses, of 300% of the daily performance of the PHLX Semiconductor Sector Index. The fund, under normal circumstances, invests at least 80% of its net assets in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index measures the performance of domestic companies engaged in the design, distribution, manufacture and sale of semiconductors.
U.S. markets have reeled in response to growing fears over the coronavirus contagion that could soon be declared a pandemic, or widespread outbreak across a whole country or the world. Consequently, many investors have taken the opportunity to trim gains after a multi-year run that has pushed U.S. markets to record high levels. With the markets being priced to perfection after strong earnings reports and stable economic growth, the sudden black swan event from a widespread contagion has triggered a precipitous sell-off.
Nevertheless, there are still some more optimistic traders that are looking at the selling as a buying opportunity, betting on health industries to come out with a vaccine to allow the global economy to turn around for the second half of the year.
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