Yahoo Finance 5 Top-Performing Leveraged or Inverse ETFs of May
The month of May was marked by volatility. Although recession fears and debt default worries continued to weigh on investors’ sentiment, cooling inflation and better-than-expected earnings drove the stocks higher. The tech-heavy Nasdaq Composite Index outperformed, gaining 5.8%, while the S&P 500 added just 0.3%. The Dow Jones Industrial Average Index dropped 3.5% for the month.
This led to higher demand for leveraged and inverse-leveraged ETFs as these fetched outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that gained more than 20% in May. These include BMO REX MicroSectors FANG+ Index 3X Leveraged ETN FNGU, GraniteShares 1.5x Long NVDA Daily ETF NVDL, MicroSectors Oil & Gas Exp. & Prod. -3x Inverse Leveraged ETN OILD, ProShares UltraPro QQQ TQQQ, and MicroSectors Gold Miners -3X Inverse Leveraged ETN GDXD. The funds will remain investors’ darlings, provided the sentiments remain volatile.
The technology sector dominated the stock market rally in May, primarily thanks to the artificial intelligence (AI) mania. Moderating inflation, upbeat corporate earnings, and safe-plays appeal added to the strength. The Nasdaq 100 enjoyed its longest monthly winning streak since December 2021, jumping 7.6%.
The “Magnificent Seven” (the term given by Bank of America strategist Michael Hartnett) — Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), Tesla (TSLA) and Nvidia (NVDA) — saw a huge rally last month. In particular, Nvidia joined the trillion-dollar market capitalization club and became the first chipmaker to ever hit the trillion level (read: Nvidia Hits Trillion-Dollar Market Cap: 5 ETFs to Track).
However, debt default fears and recession worries continued to remain an overhang. The energy sector underperformed as oil prices declined.
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position, or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts or other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend (see: all the Inverse Equity ETFs here).
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear.
We have profiled the ETFs in detail below:
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) – Up 57.1%
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 bps in annual fees. It has accumulated $1.7 billion in its asset base and trades in an average daily volume of 2.5 million shares (read: 5 ETFs Leading the Tech Outperformance in May).
GraniteShares 1.5x Long NVDA Daily ETF (NVDL) – Up 55.6%
GraniteShares 1.5x Long NVDA Daily ETF magnifies exposure to a single trade, seeking 1.5 times (150%) the daily percentage change of the common stock of NVIDIA. It has an expense ratio of 1.15% and trades in volume of 85,000 shares a day on average. GraniteShares 1.5x Long NVDA Daily ETF has amassed $31.3 million in its asset base.
MicroSectors Oil & Gas Exp. & Prod. -3x Inverse Leveraged ETN (OILD) – Up 31.5%
MicroSectors Oil & Gas Exp. & Prod. -3x Inverse Leveraged ETN is linked to three times inverse performance of the MicroSectors Oil & Gas Exploration & Production Index. The index provides exposure to the large-capitalization companies that are domiciled and listed in the United States, and active in the exploration and production of oil and gas.
MicroSectors Oil & Gas Exp. & Prod. -3x Inverse Leveraged ETN has amassed $28.9 million in its asset base and trades in a lower average volume of 84,000 shares. It charges investors 95 bps in annual fees and expenses.
ProShares UltraPro QQQ (TQQQ) – Up 23%
ProShares UltraPro QQQ offers three times the leveraged exposure to the NASDAQ-100 Index. It has amassed $14.5 billion in AUM and trades in a heavy volume of 110.2 million shares, on average. It charges 86 bps in annual fees (read: Nasdaq ETFs Won in May: Further Rally Expected Ahead).
MicroSectors Gold Miners -3X Inverse Leveraged ETN (GDXD) – Up 22.9%
MicroSectors Gold Miners -3X Inverse Leveraged ETN seeks to offer three times inverse leveraged exposure to the S-Network MicroSectors Gold Miners Index. MicroSectors Gold Miners -3X Inverse Leveraged ETN has accumulated $51.6 million in its asset base and trades in an average daily volume of 1.3 million shares. It charges 95 bps in annual fees.
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ProShares UltraPro QQQ (TQQQ): ETF Research Reports
MicroSectors Oil & Gas E&P -3x Inverse Leveraged ETNs (OILD): ETF Research Reports
MicroSectors FANG+ Index 3X Leveraged ETN (FNGU): ETF Research Reports
MicroSectors Gold Miners -3X Inverse Leveraged ETNs (GDXD): ETF Research Reports
GraniteShares 1.5x Long NVDA Daily ETF (NVDL): ETF Research Reports
