Leveraged ETFs, Volatility and Range-Bound Markets
Tue, Jul 27, 12:52 PM ET, by Bill Luby
I noticed that Direxion, the dean of triple ETFs, has added a handful of tools to their web site recently. These include: While all five of these tools (plus several more that are specific to Bloomberg users) are helpful for understanding how leveraged ETFs work and what to expect from them, the one that I am drawn to is the volatility tool, a snapshot of which is appended below. If you are one of those investors who see the potential for range-bound trading in stocks and the possibility of entering The Elusive Trading Range, then straddles, strangles, butterflies and condors on leveraged ETFs are one way to capture greater premium than betting on a lack of movement in an unleveraged underlying. Unfortunately the Direxion volatility tool is limited to 10, 30, 90 and 180 day volatility look back periods. Even more disappointing is that the data is stale. Right now the volatility data are calculated on the basis of June 30th data. Using a good options broker or data provider, one can build their own leveraged ETF watch list and get real-time implied volatility, etc., but kudos to Direxion for taking a small step to address some of the concerns that have been raised about leveraged ETFs in recent months. For more on related subjects, readers are encouraged to check out:
[source: Direxion]
Disclosure(s): none
SDI Glossary: "Call" Definition
SDI Glossary: "ETFs" Definition
SDI Glossary: "Margin" Definition
SDI Glossary: "Option" Definition
SDI Glossary: "Risk" Definition
SDI Glossary: "Volume" Definition
This Article's Word Cloud:
After
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