Leveraged and Inverse ETFS: Tools for Trading Titans, Gold Miners, and Treasuries

One of the big stories in markets today I feel like you can't avoid is the concentration at the top.

I mean, if you look at the top five names in the S&P 500, they count for about 30% of the market capitalization.

That's over double what it was just 10 years ago.

So, if you want to be a tactical trader and you want to either buy into this rally or fade the rally, you need to be trading those top names and the Titans allow for you to do so. >> Hello everyone, welcome to the program.

I'm Stephanie Stanton.

It is great to have you with us.

Join ETF Guides community by hitting the subscribe button and don't forget to post your comments.

Of course, we always enjoy hearing from you.

As the ETF landscape evolves, a new class of products is gaining traction.

Leveraged and inverse ETFs with exposure to concentrated equity baskets.

So, how do these funds work and how can they help you navigate fastmoving markets?

Well, joining us now is Ryan Lee, senior vice president of product and strategy at Direction.

Ryan, thank you for joining us.

It's great to have you. >> Yeah, great to be here.

Thank you guys for having me today. >> So, with an estimated 1.3 trillion in the sector ETF category, there's always been of course big interest in trading sector ETFs.

And direction recently launched its Titans leveraged and inverse ETFs to amp up sector exposure for traders.

Can you give us a snapshot of this new ETF suite and then explain the mechanics of how these funds work? >> And in order to really set the background for it, we got to properly introduce, you know, who we are at direction and what we've done over these past years.

And so to your point about sector ETFs, we've long played in that space.

You know, we offer leverage across financials, semiconductors, biotech, and we've really run the gamut.

Um, that all being said, what we've offered historically has always been broad basket funds.

So anything from 500 names in it, 100 names in it, but very spread out ways to play a certain sector.

The Titans are just kind of a next step in the evolution for us.

So the Titan ETFs offer equal weight exposure to the top five names in a given sector and all of these are then 2x so leveraged funds.

So we offer them across semiconductors, biotechnology, technology, and energy.

Again, those are all places where we've offered leverage in the past.

But now these are ways for you to trade the leaders and to kind of forget the noise.

One of the big stories in markets today I feel like you can't avoid is the concentration at the top.

I mean if you look at the top five names in the S&P 500, they account for about 30% of the market capitalization.

That's over double what it was just 10 years ago.

So if you want to be a tactical trader and you want to either buy into this rally or fade the rally, you need to be trading those top names and the Titans allow for you to do so.

So again as mentioned if you look at semiconductors for example our largest ETF as a firm at direction is SOXL the 3x semiconductor fund that has about 100 different names in it.

Now if you want to just play those top names the Nvidia AMD Qualcomm Broadcoms of the world our Titan funds are the way to go.

TSXU is a 2x long fund and TSXD is a 2x bare fund.

And so we like to offer both sides of the trade on semis because it's really the story of the day.

Anything AI related goes back to semiconductors.

And so if you're a buyer of the AI narrative, great.

We have the tactical trading tool for you with TSXU.

If you want to fade that rally, TSXD is the tool for you.

So we like to offer traders both sides.

We want to give them a concentrated way to trade the top headlines today. >> Absolutely.

Yeah, definitely a lot of variety there.

So the recent pullback in stocks has put inverse ETFs into the spotlight.

Uh, direction offers many inverse ETF choices, some with leverage, some without.

How do investors or traders typically use these inverse ETFs for either short-term speculation or hedging a long only equity portfolio? >> Yeah, it's a fantastic question.

Again, as as the market feels like it's been ripping and roaring for months and months on end, uh, you know, we've started to finally see a bit of a pullback and as a result of that, our inverse funds get a bit more attention.

It's we offer them across again a wide range.

So, anything from negative 3x, negative -2x all the way to negative 1x, which are really almost like hedging tools.

So, if you look at the market and you think things are getting a little frothy and you want to put on a short-term trade with whether it's a geopolitical catalyst, whether it's the Federal Reserve, whether it's even this government shutdown and you think there's something in the near term that'll cause the market to pull back, inverse funds can be used to make a profit off the market selling off.

Now, if you look at something like a Palanteer, for example, that was a high-flying name these past 5 years is up north of 200, sorry, 2,000%.

Which is frankly unbelievable.

It's pulled back a bit off earnings.

No name can fly up forever.

Now, if you're a holder of Palunteer and you don't want to realize what could be a meaningful taxable gain by selling your portion of the of Palunteer, what you can do is buy PLTD, our negative 1x Palanteer fund.

This is a quick, efficient way to hedge your position without realizing a taxable gain in a long-standing holding. >> So, this is interesting.

Directions single stock ETFs um continuing to garner exceptional trading volume and asset growth.

Why do you think traders are gravitating to single stock ETFs and what are the use cases? >> Yeah, and so one of the use cases was just kind of how I had outlined with Palanteer where they could be great for hedging if you're looking at the inverse side.

Now, on the other side of the coin, we do offer 2x funds where if you're a buyer of Palanteer now, if you think this pullback is oversold, we have a 2x Palanteer fund, PLTU.

So, if you think a stock is getting oversold and you think there's going to be a short-term catalyst for a bounceback, our 2X funds are a great tool for tactical traders.

One example of this was Meta's earnings.

Obviously the past uh two weeks ago met then it pulled back meaningfully 10% on the news and it you know missed some guidance around some tax treatment of the big beautiful bill its AI capex frankly has been getting higher and higher and that's something that investors seem to be getting a little skittish around.

Well despite that 10% pullback traders looked to our 2x metap fund that was down 20%.

And we actually saw the greatest trading day for that fund since its inception as a result of the pullback.

So traders look to buy the dip with our 2x funds or they can look to hedge their positions with the negative 1x funds. >> Yeah.

So it just really again gives a lot of flexibility and I I think a lot of people when they think of ETFs they think of sort of like many stocks in one or a basket of stocks.

Uh so the single stock is kind of a relatively new concept is it not? >> Yeah.

And so these came live back in 2022 and really this past year in particular you've seen just incredible growth.

Uh our one of our largest funds as a firm is actually our 2x Tesla fund TSL.

And if you think about it, I've mentioned Tesla, Palanteer, Meta, these are all names that oftentimes see volatile trading periods.

And for tactical traders with conviction, buying a 2x fund or going short with a negative 1x fund is really just a great way to make profit on quick short directional trades.

Again, these are not buy and hold investment vehicles.

This leverage resets daily.

Uh the same we like here at direction is the trend is your friend.

So if you're long a 2x fund and the market is just one directional bull market, great.

You can make a great profit.

But if markets get choppy, you see real volatility or the market runs against you, that compounding works against you as well.

So we really do like to reiterate these are tools meant for tactical traders and for traders looking to learn more.

Go to our website direction.com, go to our direction university, and really just unpack some of the resources there to better understand how these fit your broader portfolio. >> All right, let's shift gears.

We need to talk about gold.

Gold recently hitting all-time highs of course driven by concerns of geopolitical risk, government debt, inflation, etc.

Um, gold surge has lifted bullish gold mining ETFs and direction offers a few ways for investors and traders to participate via Jug.

Um, and that's your ticker.

It's pronounced like JNug, Jn Nug.

And then you also have NugT, which is pronounced like Nugget.

So tell us more about these.

Yeah.

So, Nugget and Jay Nug are two bullish ways to trade gold miners and junior gold miners respectively.

And to your point, gold's been on an unbelievable run, you know, fueled by a multitude of factors.

Whether it's the geopolitical landscape, whether it's US dollar denomination kind of fading in certain places and really just inflation kind of running out of control, gold prices are through the roof.

As a result of that, the gold miners both on the major ones and the junior ones have profited as a result.

Um, if you kind of think about the distinction between the two, the gold miners themselves typically have larger robust operations.

Now, there's some overlap here too with the junior gold miners, but the junior ones tend to be a little bit deeper in the exploration stages and don't yet have operational minds.

Now, if gold prices continue to rise, of course, both sides of those can profit.

One other piece of the puzzle that I think traders oftentimes overlook with gold miners is oil prices.

And oil prices have faced some pressure as well.

Again, the geopolitical landscape has certainly helped on that front.

And when oil prices are lower, it is easier for these gold miners to both get the gold and to explore new mines.

So that's been another tailwind in favor of the gold miners this year.

Now those two things in conjunction with each other, the price of gold and the price of oil, they've really benefited the bull side of the trade.

If you think either one is getting a bit frothy and these gold miners may have a pullback, we offer actually bare funds on these as well.

Dust and J Dust, JD DST.

So we offer both sides of the trade on gold miners and junior gold miners.

And really it's a matter of what you as a tactical trader believe is the opportunity here going forward. >> All right.

And uh Ryan, one final question before you take off.

You know, given the US Federal Reserve's higher for longer stance on interest rates, how have the direction daily 20year Treasury bear 3X shares and your ticker is TMV.

And then you have the Bull 3X shares, the ticker TMF.

Uh how have those ETFs reacted and how are traders using them to capitalize on all this?

Yeah, it's a great question.

TMF and TMV always see, as I'm sure you could guess, increased attention around anytime the Federal Reserve is making an announcement.

Anytime you see Jerome Powell out there talking, those two funds are inevitably seeing an increase in volume.

Now, it's great again that we offer both sides of the trade there because there's so much uncertainty as far as I'm concerned, as far as the Fed's path forward.

I mean, if you heard Powell's comments after the last rate cut that was essentially fully priced into the market, December's cut seems a little bit in question now.

So much of this is driven by the lack of data as a result of the government shutdown.

And so as a result of that, that uncertainty tends to lead to volatility.

If you're a trader looking to capitalize on this volatility, TMF and TMV offer you great tools. >> All right.

Well, Ryan, such great information.

Thank you so much.

It is always a pleasure to talk to you.

We appreciate your time and we will see you soon. >> Great.

Thank you so much.

Appreciate the time today, guys. >> You are very welcome.

And be sure to visit direction.com again to learn more about direction's ETF lineup, news updates, and education for traders.

I'm Stephanie Stanton.

Thank you for watching.

We will see you on the next episode.