Direxion tempers inverse & leveraged ETF line-up amid coronavirus volatility

Apr 1st, 2020 | By | Category: Alternatives / Multi-Asset

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Inverse and leveraged ETF specialist Direxion has made several adjustments to its product line-up in response to the unprecedented market volatility arising from the Covid-19 pandemic and oil price war.

Direxion revises inverse & leveraged ETFs amid COVID-19 volatility

Direxion has reduced the leverage factor on ten of its ETFs due to current market volatility.

The changes include scaling down the magnitude of exposure offered by ten of its most highly leveraged ETFs, as well as permanently shuttering eight ETFs no longer considered to be economically viable.

Reduced leverage

The ten ETFs that will have their leverage factors reduced cover a range of equity exposures that are heavily influenced by the performance of underlying commodity markets.

These exposures include Brazilian and Russian stocks, gold miners, and the energy and oil & gas industries.

The funds being tempered currently offer 300% of the daily return or inverse daily return on their underlying indices. These will now provide only 200% daily exposure.

The indices and ETF ticker codes will remain unchanged but the fund names will be altered to reflect the lower leverage factor. The are:

Direxion Daily MSCI Brazil Bull 2X Shares (BRZU US)
Direxion Daily Russia Bull 2X Shares (RUSL US)
Direxion Daily Gold Miners Index Bull 2X Shares (NUGT US)
Direxion Daily Gold Miners Index Bear 2X Shares (DUST US)
Direxion Daily Junior Gold Miners Index Bull 2X Shares (JNUG US)
Direxion Daily Junior Gold Miners Index Bear 2X Shares (JDST US)
Direxion Daily Energy Bull 2X Shares (ERX US)
Direxion Daily Energy Bear 2X Shares (ERY US)
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH US)
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 2X Shares (DRIP US)

According to Direxion, the current liquidity crunch has added strain to energy and commodity markets and access may remain challenging for some time. Funds that track these markets, especially those with higher leverage factors, have experienced a dramatic increase in explicit and implicit trading costs, leading Direxion to adjust the ETFs to protect shareholders.

Direxion initially scheduled the change in leverage factor for 19 May 2020; however, the severity of the market’s turmoil has forced the firm to expedite the process, bringing the implementation date forward to the market’s close on 31 March 2020.

Fund terminations

Direxion is also in the process of liquidating eight ETFs that ceased trading on 27 March 2020. The funds offered a diverse range of exposures and varying degrees of leverage. All of the ETFs house insignificant assets under management.

The liquidating ETFs are as follows:

Direxion Daily Russia Bear 3X Shares (RUSS US)
Direxion Daily Natural Gas Related Bull 3X Shares (GASL US)
Direxion Daily Natural Gas Related Bear 3X Shares (GASX US)
Direxion Daily MSCI Developed Markets Bear 3X Shares (DPK US)
Direxion Daily Mid Cap Bear 3X Shares (MIDZ US)
Direxion Daily Regional Banks Bear 3X Shares (WDRW US)
Direxion Daily MSCI European Financials Bull 2X Shares (EUFL US)
Direxion Daily Total Bond Market Bear 1X Shares (SAGG US)

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