The Direxion Triple ETF Revolution Has Arrived!

Three weeks ago last Friday I thought I may be sticking my head out a little too far in Prediction: Direxion Triple ETFs Will Revolutionize Day Trading. Well, here we are barely three weeks later and these ETFs are racking up more volume in the first half hour of Monday’s session than they did in an entire trading day when I made my original prediction. (see graphic below)

In short, the revolution has already arrived.

Sure, there have been some issues with tracking error as Adam at Daily Options pointed out in Triple the Fun. On an intra-day basis, however, these ETFs seem to track and trend relatively accurately. And if you get the direction right, are you really going to be upset that you were right a factor of say only 2.7 times the underlying instead of an advertised multiplier of 3.0? Either way, it was still probably a wise allocation of capital.

The next frontier may turn out to be options strategies associated with these 3x and -3x ETFs. All eight of these ETFs are optionable and options activity seems to be picking up rapidly, particularly in BGU (BGU), the large cap 3x bull ETF, which currently sports an implied volatility of about 150 and a historical volatility in excess of 200.

[source: Yahoo]

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Comment by Donald W.

2008-12-09 19:23:15

The best I can relate to the experience of trading these 3x is it is like an individual trader becoming a hedge fund.

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