Markets rose sharply yesterday as optimism arose over recent earnings releases, but investors are yet to breathe a complete sigh of relief as major uncertainties regarding inflation, consumer confidence, geopolitical tensions, and rate hikes still hang in the air.
Nonetheless, when bear territory and positive earnings coincide, savvy investors can cherry-pick opportunities. Over the past few weeks, we have highlighted different ways in which investors can play their conviction ideas via thematic stock ETFs and bond ETFs.
This week, we are shining the light on inverse ETFs, leveraged ETFs, and single stock ETFs that can help an investor take his strategy implementation a notch higher amid present market gyrations.
Leveraged ETFs
Leveraged ETFs provide the potential to magnify the returns on their underlying indexes. Some promising ETFs in this space are ProShares UltraPro QQQ (TQQQ), Direxion Daily Aerospace & Defense Bull 3x Shares (DFEN), and MicroSectors Solactive FANG & Innovation 3x Leveraged ETN (BULZ).
TQQQ seeks to achieve 3x the daily movement of the NASDAQ-100 and is already up 18.8% over the past five days. Alternatively, if you want to go sector-specific with a macro focus, then DFEN and BULZ are for you.
Just as major defense names continue to announce major contract wins, DFEN seeks to deliver 3x the daily performance of the Aerospace & Defense Index and is up 12% over the past five days. BULZ is an exchange-traded note (ETN) that focuses on delivering 3 times the daily movement of the Solactive FANG Innovation index.
BULZ has dropped 83.4% so far this year as investors jumped the technology ship, but greater risks mean greater rewards. Over the past five days, the ETN is up a whopping 28.7% just as major tech names are finding their footing.
Inverse ETFs
Inverse ETFs, as the name suggests, are designed to move in the opposite direction of their underlying assets. The ProShares UltraPro Short QQQ (SQQQ), Direxion Daily 20+ Year Treasury Bear 3x Shares (TMV), and Direxion Daily Real Estate Bear 3x Shares (DRV) are some of the names that can help you make a bet when your bear goggles are on.
SQQQ seeks to move -3x the daily movement of the NASDAQ-100. If you had put money in this ETF at the beginning of 2022, your gains would have been 67.8%, just as the market kept plummeting.
What if you could gain big from the current aggressive rate cycle instead of seeing your capital gains wither away? TMV seeks to achieve -3x the daily movement of the ICE U.S. Treasury 20+ year bond index and has delivered 73.3% returns so far in 2022.
The third name on the list, DRV, seeks to move 3x in the opposite direction of the real estate select sector index and has already delivered 42.6% gains so far this year.
Single Stock ETFs
Finally, if broad-based ETFs are not your thing and you like to focus on single names instead, then single stock ETFs come to the rescue with leveraged as well as inverse trading on underlying names.
Some names in the space are AXS 2x PFE Bull Daily ETF (PFEL), AXS TSLA Bear Daily ETF (TSLQ), and AXS 1.25x NVDA Bear Daily ETF (NVDS).
PFEL seeks to deliver 2x the daily performance of Pfizer (PFE) and is up 5.6% over the past five days. TSLQ, on the other hand, aims to deliver -1x the daily performance of Tesla (TSLA) shares and is down 5.3% over the past week just as Tesla shares climbed over this period.
The recently passed CHIPS Act has kept NVIDIA (NVDA) in focus, with shares rising nearly 14% over the past five days, while NVDS has dropped 12.4% during this period.
Closing Note
The market continues to abound with opportunities, and these names can help you gain from whichever way the tide turns.
Additionally, the amplifying of both long and short ideas can be achieved without having to go down the derivatives rabbit hole by the deft employment of these ETFs.
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