Go Long with Treasuries Using "TMF" Leverage | Leveraged & Inverse Channel

It might be Week 9 in the National Football League, but in the world of bond trading, traders have the option to go long–as in the long end of the yield curve in safe haven Treasuries. Football analogies aside, one of the tools traders can use is the Direxion Daily 20+ Year Treasury Bull 3X Shares (TMF).

For traders looking to maximize their gains, TMF provides leveraged exposure. TMF seeks daily investment results, before fees and expenses, of 300% of the daily performance of the ICE U.S. Treasury 20+ Year Bond Index.

The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments 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 is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than 20 years.

TMF, and other leveraged products from Direxion Investments, give investors the ability to:

  • Magnify short-term perspective with daily 3X leverage;
  • Go where there’s opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile with liquidity to trade through rapidly changing markets

TMF Chart

Of course, before diving into trading TMF, novice traders need to understand the risks. Leveraged products like TMF are not for the weak at heart.

“Leveraged and inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage,” Direxion Investments notes. “They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments.”

With all the disclaimers out of the way, it will be an interesting Q4 as the capital markets try to move on from a contentious presidential election. Lost in all the madness is the Federal Reserve keeping rates steady amid all the market uncertainty that’s still abound.

As 2020 turns into 2021, a lot of questions will remain as to where interest rates will head. Can the economy bounce back and thus, see an uptick in inflation?

These are things TMF traders will have to keep in mind, but the more volatility the better for action-oriented traders looking to make short-term gains in Treasury movements.

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