Pass on this ETF: Direxion Daily S&P Biotech 3X Bull ETF

Article Excerpt

DIREXION DAILY S&P BIOTECH 3X BULL ETF $4.98 (New York symbol LABU), provides highly leveraged exposure to the S&P Biotechnology Select Industry Index. The ETF aims to generate returns three times the daily movement of the S&P Biotechnology Index. The fund launched in May 2015 and has a large asset base of $1.05 billion. The MER is high at 1.01%. The daily excess return of the ETF is created through the use of derivative instruments and swap arrangements. When the daily movement in the index is up, the ETF aims to generate 300% of the positive return; the opposite will happen when the index declines. The underlying S&P index includes 140 biotech stocks on an equal-weighted basis. It includes lesser-known companies such as Intercept Pharmaceuticals, Bluebird Bio, Krystal Biotech, Geron Corp., and Biohaven. Complex leveraged ETFs like this one often lose value more readily than they gain it. For example, between July and August 2015, the ETF’s units lost 57% of their value; a similar decline…