GUSH, a Direxion leveraged ETF, allows a savvy investor to extract a larger return for the same amount of capital by investing in the Exploration & Production sub-index. Following a near-bankruptcy experience in 2020, many E&P businesses saw their share prices soar in 2021 as a result of higher oil prices, debt reduction programs, and overall lower production costs. GUSH can be purchased outright or through call options by an investor looking for a continued rise in E&P share prices. This ETF is designed for market practitioners with a significantly shorter time horizon than buy-and-hold investors.
What causes GUSH to be so low?
During the first 11 months of 2020, the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares ETF (GUSH) plummeted by nearly 97 percent. This poor performance can be attributed to a supply surplus produced by a price war between Saudi Arabia and Russia, as well as a sharp decline in demand induced by the worldwide crisis. Demand for further oil and gas exploration was effectively stifled as a result.
Unfortunately for GUSH investors, the S&P Oil & Gas Exploration & Production Select Industry Index has a 2x leveraged daily exposure. To reduce concentration in a small number of significant-sized enterprises, GUSH weights its index evenly, but this did not help much in 2020.
As of November 2020, GUSH had a gross expense ratio of 1.05 percent, up from 1.05 percent when it first began in May 2015.
What causes the GUSH stock to rise?
seeks daily investment returns equal to 200 percent of the S&P Oil & Gas Exploration & Production Select Industry Index’s daily performance. Under normal conditions, the fund invests at least 80% of its net assets (including borrowing for investment purposes) in index financial instruments and securities, index ETFs, and other financial instruments that provide daily leveraged exposure to the index or index ETFs.
What is the GUSH stock forecast?
On the upside, DirexionDaily’s April 2022 goal predictions are 142.62, 123.16, 103.7, and on the downside, 32.92, 52.38, 71.84. On the upside, DirexionDaily forecasts 159.01, 131.59, 104.16 for May 2022, and on the downside, 16.53, 43.96, 71.38.
Is GUSH a good long-term bet?
Because it leverages derivative instruments to increase the returns of the underlying index, GUSH should only be utilized as a short-term trading product. The ETF must buy when underlying asset prices rise and sell when they fall every day. Long-term investors are thus harmed by the compounding effects of everyday returns.
What exactly is the GUSH ETF?
aims to outperform the S&P Oil & Gas Exploration & Production Select Industry Index by 200 percent on a daily basis. Standard & Poor’s Index Provider provides the S&P Oil & Gas Exploration & Production Select Industry Index (SPSIOPTR), which covers domestic firms in the oil and gas exploration and production sub-industry. For a single day, the ETF aims for a return of 200 percent of the index. There will be a basis (i.e. disparity) in the GUSH returns vs the index returns over a longer time frame period. This vehicle is not for buy-and-hold investors because to its leveraged nature, but rather for knowledgeable market practitioners with short time periods. Following near-bankruptcies in 2020 as a result of low oil prices, bloated balance sheets, and debt maturities profiles, many North American E&P businesses had an explosive 2021, as evidenced by the stellar GUSH performance. Investors seeking speculative positions in the E&P sector can purchase GUSH outright or use the current option chain to purchase the ETF via call positions. The portfolio differences between GUSH and a similar leveraged fund from Direxion, ERX, are also discussed in the article.
What factors influence the price of an ETF?
ETFs are purchased and sold during market hours, and their market price is decided by the value of the fund’s holdings as well as supply and demand in the ETF’s market place.
What is the process of ETF depreciation?
ABC rises from $10 to $12.50 on the first day, up 25% in line with the Big Index, while XYZ rises from $10 to $15. On the second day, ABC shares lose 20% of their value, or $2.50, and close at $10. XYZ, on the other hand, loses twice as much as the Big Index, or 40%, or $6, to finish the day at $9. The leveraged ETF XYZ is down $1, trading below where it started two days ago, despite the fact that the Big Index and ABC ETFs are both breakeven from where they started. The loss of performance ascribed to the multiplying effect on returns of the leveraged ETFs’ underlying index is referred to as decay in the context of leveraged ETFs. The leveraged ETF’s performance was reduced by $1, or 10%, as a result of the decay.
The volatility of the returns adds to the decay. The variance of returns is known as volatility. To put it another way, the more the volatility of a stock, the more up and down it goes. Volatility is a significant negative influence in leveraged ETF returns since decay can eat away at earnings. The good news is that the effect of decay is modest as long as the underlying index moves in a single direction. When negative days are introduced into the mix, degradation emerges, as seen in the example.
Because leveraged ETFs fluctuate as a multiple of their underlying index, they carry additional risk that the underlying index does not. Tighter indexes can have huge swings, whereas larger indexes like the S&P 500 move in a smaller range than individual equities. There are leveraged ETFs that track high-beta market sectors. Stocks with a high beta are more volatile than the overall market. On any one day, leveraged ETFs that track these high-beta sectors can move 20% or more in either way.
This leverage can be used in both directions. While leverage can be beneficial when a deal is moving in your favor, it can be disastrous when it is working against you.