With the major homebuilders exchange traded funds trading at their highest levels in more than eight years, applying some leverage to that trade might seem like a good idea for some risk-tolerant traders.
And if Treasury yields start heading higher again in anticipation of an interest rate, perhaps adding some leverage to the regional bank trade will prove to be profitable.
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Or homebuilders stocks and ETFs could retreat and Treasury yields could continue doing the same, sapping regional banks in the process.
Either way, Direxion has users of leveraged ETFs covered with four new products that came to market on Wednesday.
Direxion, the second-largest issuer of leveraged and inverse ETFs, introduced the first triple-leveraged homebuilders ETFs, the Direxion Daily Homebuilders & Supplies 3x Bull Shares (NYSE: NAIL) and the Direxion Daily Homebuilders & Supplies 3x Bear Shares (NYSE: CLAW).
NAIL's objective is to deliver triple the daily returns of the Dow Jones U.S. Select Home Construction Index, while CLAW looks to deliver triple the daily inverse returns of that index. The Dow Jones U.S. Select Home Construction Index is the index followed by the $2.38 billion iShares U.S. Home Construction ETF (NYSE:ITB).
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Underscoring the notion that NAIL is perhaps a well-timed launch are these data points. In what has recently been a tricky time for broader U.S. equity indexes, ITB is up 8.2 percent over the past month and is trading near its highest levels since July 2007.
Massachusetts-based Direxion also rolled out the Direxion Daily Regional Banks Bull 3X Shares (NYSE: DPST) and the Direxion Daily Regional Banks Bear 3X Shares (NYSE: WDRW). DPST, the bullish member of that pair, will look to deliver triple the daily returns of the Solactive U.S. Regional Banks Total Return Index while WDRW will attempt to produce three times the daily inverse performanceof that index.
In the case of the regional bank pair, WDRW, the bear fund, looks like the right play right now. Amid declining risk appetite, 10-year Treasury yields have tumbled nearly 9 percent over the past month, causing declines for regional banks and the relevant ETFs that have been so eagerly anticipating the Fed to boost borrowing costs.
These four launches from Direxion continue the firm's brisk pace of ETF debuts this year, many of which have been first-of-their-kind triple-leveraged plays on popular, heavily-traded industries. For example, the firm introduced the Direxion Daily S&P Biotech Bear 3X Shares (NYSE:LABD) and the Direxion Daily S&P Biotech Bull 3X Shares (NYSE:LABU) in late May.
The Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares (NYSE:GUSH) and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares (NYSE:DRIP) also came tomarket in late May.
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