Betting Big on Biotech ETFs? Traders Leverage ETFs

“For the bearish among us, there are several potential catalysts that could lead to a reversal in Biotech: mainly, the IPO window closing (preventing the sector from raising much-needed capital); a frothy VC market that could lead to out-of-whack valuations; or most importantly, that the drugs simply don’t work,” said Direxion.

Related: Biotech ETFs Pop on Celgene, Juno Deal

Flows data suggest that, in recent weeks, traders have been favoring LABU over the inverse LABD. However, those situations can change in a matter of days. Additionally, investors looking for buy-and-hold plays on biotechnology stocks, should stay away from leveraged ETFs. Leveraged funds are best used as daily instruments and should not be held for multiple weeks or months.

For more information on the biotech sector, visit our biotechnology category.