Direxion deploys ETFs for turbocharged AI bets
Professional investors with a bullish or bearish conviction on artificial-intelligence stocks and looking to magnify their profits with leverage can now do so with two new exchange-traded funds.
The Direxion Daily AI and Big Data Bull 2X Shares ETF seeks to achieve 200% of the daily returns from its benchmark, the Solactive US AI & Big Data Index. The bear equivalent of this fund seeks to garner 200% in the opposite direction of the gauge’s move. The funds are designed to reflect only single-day moves and won’t seek to accumulate gains over time.
The craze for AI stocks has been the most popular trade of the year, predicated on the transformative potential of the technology on businesses and society. Leveraged funds have raked in $12.4 billion of inflows this year, on track to surpass last year’s $19.2 billion, according to Bloomberg Intelligence. The introduction of Direxion’s ETFs comes at a time when AI stocks are at a crossroads, with the rally having stalled amid concerns over excessive valuations.
“AI is here to stay and people are looking to trade that on both the bullish and bearish directions,” said Edward Egilinsky, managing director at Direxion Funds. “Irrespective of the short-term moves, there will always be interest in this sector.”
Overall, the slide in volatility and lower premiums for puts has made broader stock market hedging more attractive, and some VIX call spread buying was seen last week and Monday.
“The rise in interest rates that has pushed up SPX forwards increases call premiums relative to puts,” said Tanvir Sandhu, Chief Global Derivatives Strategist at Bloomberg Intelligence. “This has eased the entry for collar strategies that sell calls and buy puts. The decline in the SPX skew, which is
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