Nailed It: This Leveraged ETF Is On Fire

Homebuilder stocks and exchange traded funds have recently been buoyed by a spate of encouraging data. Data out Monday show the National Association of Home Builders/Wells Fargo housing market index jump three points to 64, its highest reading in a decade.

On Tuesday, it was revealed that September housing starts surged 6.5 percent, well ahead of the 1.4 percent increase expected by economists. Predictably, those data points and other are boosting homebuilder stocks and ETFs. For example, the $2.1 billion iShares U.S. Home Construction ETF (NYSE:ITB) is up 7.7 percent this year and resides at its highest levels in over eight years.

Gains for homebuilders and stocks would be even more impressive if not for a slump that started in August and lasted well into September, but the aforementioned data points have sparked a rebound in the homebuilder space and that is proving to be good news for a new leveraged ETF, the Direxion Daily Homebuilders & Supplies Bull 3X Shares (NYSE:NAIL).

The aptly-tickered NAIL and its bearish counterpart, the Direxion Daily Homebuilders & Supplies Bear 3X Shares (NYSE: CLAW) debuted two months ago and while NAIL's timing looked inauspicious at the start, that is not the case today. Designed to deliver triple the daily performance of the Dow Jones U.S. Select Home Construction Index, the same index tracked by ITB, NAIL is up nearly 20 percent since the end of September.

That index includes some of the most prominent homebuilders, such as D.R. Horton Inc. (NYSE:DHI), Lennar Corp. (NYSE:LEN) and Pulte Group Inc. (NYSE:PHM). Those stocks combine for nearly 30 percent of ITB's weight.

Of course, what has been good for NAIL has been bad for the bearish CLAW. Since September 29, the bearish homebuilders ETF is off 22.6 percent and over the past 30 days, only one bearish Direxion ETF has been more volatile, according to issuer data.

As is the case with some other leveraged ETFs, including some other rookie funds, NAIL has the potential to be a useful part of the agile trader's toolbox if Treasury resume moving higher in anticipation of higher interest rates.

Home builders may see their share prices fall upon the initial rate hike. A short-term fund rate hike would most likely push mortgage interest rates up with it. High mortgage rates dilute demand for new homes, as mortgage loans become expensive. This lowers purchasing power for buyers, affecting volumes, revenues and profits for homebuilders, saidDirexion in a recent note.