Investors have a new way to bet up and down on large-cap stocks.
AXS Investments launched eight of the 18 leveraged equity ETFs approved this month. The funds aim to increase the proportion of short-term investments in individual stocks.
The company’s CEO, Greg Bassuk, told CNBC “ETF Edge“in Monday.” As this market matures for leveraged ETFs… we are excited to bring single-share ETF access to the US market. ”
Bassuk noted that AXS’s new products are based on actively traded stocks, including industry leaders like Tesla, NVIDIA, PayPal, Nike and Pfizer among others in its first batch. Funds of a similar nature are already available in European markets, he added.
“Its [ETF innovation is] there’s always a balance between giving investors better tools and doing so within the constraints of the law,” Bassuk explained.
Dave Nadig, financial futurist at VettaFi, addressed revenue and regulatory concerns among single-stock ETF skeptics. This is also an issue that has baffled the Securities and Exchange Commission.
“My concern is that people don’t read the labels well enough, explaining how volatility from these funds can ‘kill’ investors’ returns if the fund is held improperly,” he said. “They don’t necessarily understand that you can’t keep these for a week or two.”
Investors can also lose the advantage of diversification because single stock ETFs don’t track the entire index, according to the SEC.
“Because a heavily leveraged single-stock ETF amplifies the impact of the price movements of the underlying individual stocks, investors holding these funds are exposed to even greater risk and volatility. compared to investors holding the underlying stock” The SEC said in a statement this month.
However, Bassuk thinks the new ETFs offer investors another option that can help them profit from the daily moves. Plus, he believes that ETFs offer less risk associated with buying on margin.
“Margin investors are likely to lose more than their initial investment, while this single-stock ETF, in that respect, we believe is a better trap in that,” Bassuk said. investors cannot lose more than they are investing,” Bassuk said.
Bets are on the downside among the eight ETFs with lower direct equity leverage as of the July 14 listing. The biggest laggard is the AXS 1.5X PYPL Bear Daily ETF, which is down nearly 22%.
Rising bets are showing higher returns. The AXS 1.5X PYPL Bull Daily ETF is up just under 27%.