Which Leveraged ETFs Track the Banking Sector?

The banking sector is the section of the economy devoted to the holding of deposits, the granting of credit, and the trading and investment of financial assets. There are a number of exchange traded funds (ETF) that follow the banking sector.

Leveraged ETFs are exchange-traded funds that seek to generate a multiple return (eg, 2x or 3x) of the actual performance of the index they track. A leveraged ETF is a fund that uses financial derivatives and debt to amplify the returns of an underlying index. These funds aim to maintain a constant leverage during the investment period, such as a ratio of 2:1 or 3:1.

Key points to remember

  • Leveraged ETFs are often used by investors looking to take advantage of the short-term momentum of an index or some type of speculation.
  • This can both amplify positive returns and compound losses when price moves against you.
  • Here we look at some leveraged ETFs that track the banking industry, including leveraged bearish funds in addition to long ETFs.

Leveraged ETFs that track banks

ProShares is a leading company that offers leveraged ETFs that track a variety of sectors. Alternative ETFs, such as those offered by ProShares, offer investors the ability to reduce risk and volatility, and the ability to maintain a speculative position without the obligation to purchase derivatives. Direction also offers a number of leveraged ETFs that seek to amplify the returns of an underlying index.

Some of the more common leveraged ETFs that track the banking industry are shown below.

ProShares Ultra Financials (UYG)

This leveraged ETF provides daily investment results that are twice (2x) the daily performance of the Dow Jones US Financials Index. The fund invests in securities and derivatives chosen to reflect this main financial sector tracking index. While the financial sector includes industries in addition to the banking sector, banks are a major component of the sector and the index as well. Top holdings of this ETF in 2022 include Berkshire Hathaway, JPMorgan Chase and Visa.

Direxion Daily Financial Bull 3x Stock (FAS)

The Direxion Daily Financial Bull 3x (FAS) fund is designed to have daily investment results equal to 300% of the performance of the Russell 1000 Financial Services Index. The fund creates long positions by investing at least 80% of its assets in the securities that make up the Russell 1000 Financial Services Index or in financial instruments that provide leveraged or unleveraged exposure to the index. These financial instruments include futures, stock options, indices, swap chords, and contracts for differences (CFDs).

Direxion Daily Financial Bear 3X Shares (FAZ)

This ETF targets daily investment results that approximate 300% of the declines in return of the Russell 1000 Financial Services Index. This fund creates short positions by investing at least 80% of its assets in futures contracts, options on securities, swap agreements and other financial instruments which, when combined, provide inverse leveraged exposure to the Russell 1000 Financial Services Index.

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