Not all ETFs sacrifice performance for diversification and safety. In fact, the Direxion Daily Natural Gas R Bull 3X (GASL), the Direxion Daily S&P Biotech Bull 3X (LABU) and the Direxion Daily Gold Miners Bull 3X (NUGT) are all up more than 30% in the past month alone.
Each of these unique ETFs has blown the S&P 500 returns out of the water lately. How are they doing it? Here’s a look at what each ETF brings to the table.
Direxion Daily Natural Gas R Bull 3X (GASL)
The major trick up this ETF’s sleeve is leverage. As its name implies, the GASL tracks the natural gas market. However, it is designed to track 3X, or 300%, the performance of the ISE-Revere Natural Gas Index.
Natural gas prices have stabilized in recent weeks, and natural gas stocks and ETFs have surged. The United States Natural Gas Fund(UNG) is up 2% in the last month. However, because of its leverage, the GASL is up 72% in that same period.
GASL’s top holdings, which reset daily, are swap agreements, which carry counterparty risk. These swap agreements are how the ETF achieves its intended leverage. The daily rebalancing of the fund is the reason why daily levered funds such as these typically have a high expense ratio and tend to underperform in the long run.
It could be easy to look at the GASL’s recent performance and get visions of retiring a millionaire by buying now and holding, but leverage swings both ways. Despite the huge gains so far this year, GASL is down an incredible 99.8% (you read that right) in the past year!
Direxion Daily S&P Biotech Bull 3X (LABU)
Another Direxion levered ETF, the LABU, is…
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