With October here, third-quarter earnings season is right around the corner. That could bring opportunities with leveraged exchange traded funds, which are ideally suite for aggressive traders looking to trade around short-term events, such as earnings reports.

The financial services sector, as it does every quarter, gets the third-quarter reporting season rolling this year. The financial services sector has had its shares of struggles this year, vexing investors even as interest rates rise and members of the sector report strong earnings.

However, the sector has recently perked up and that could be a sign of short-term opportunity with leveraged exchange traded funds, such as the Direxion Daily Financial Bull 3X Shares (NYSEArca: FAS).

FAS seeks to deliver three time the daily performance of the Russell 1000 Financial Services Index. FAS has a bearish counterpart, the Direxion Daily Financial Bear 3X Shares (NYSEArca: FAZ). FAZ attempts to deliver three times the daily inverse performance of the Russell 1000 Financial Services Index.

Why Now For FAS And FAZ

Fund managers argued that banks have already hit peak earnings, pointing to some red flags such as the U.S. Treasury curve flattening as short-term yields rise in response to U.S. rate hikes from the Federal Reserve and long-term yields dip on growth and trade concerns. The flatter yield curve would typically diminish bank profits as they try to profit on the spread – short-term rates affect a bank’s borrowing costs and long-term rates limit how much they can charge on loans.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.