Direxion Shares ETF Trust - Direxion Daily TSLA Bull 1.5X Shares (TSLL)TSLL

Direxion Daily TSLA Bull 1.5X Shares (TSLL): 1.5x Leverage on Tesla's Performance

Profile: TSLL provides investors with 1.5x daily long exposure to the performance of Tesla, Inc. shares. This ETF uses swaps and other financial instruments to achieve this leverage. As a result, TSLL is best suited for short-term, aggressive investors comfortable with amplified volatility and potential losses exceeding the underlying asset's movement.

Objective: TSLL aims to deliver 150% of the daily performance of Tesla stock, before fees and expenses, by utilizing financial instruments designed to track the movements of the underlying asset price.

Issuer: Direxion Shares ETF Trust is the issuer of TSLL.

• Reputation and Reliability: Direxion has established itself as a prominent player in the leveraged and inverse ETF space, known for creating innovative and unique products. However, leveraged and inverse ETFs are inherently riskier than traditional ETFs, with amplified movements and potential losses exceeding initial investment.

• Management: Direxion's portfolio management team possesses extensive experience in managing leveraged and inverse ETFs. The team continuously monitors market trends and adjusts their strategies accordingly.

Market Share: TSLL currently holds a dominant market share within its niche category of leveraged Tesla ETFs, reflecting its popularity among investors seeking amplified exposure to Tesla's performance.

Total Net Assets: As of November 16, 2023, TSLL's total net assets stood at approximately $250 million, indicating significant investor interest in this leveraged ETF.

Moat:

• Unique Strategy: TSLL stands out by offering investors leverage to Tesla's movements, attracting those seeking amplified exposure beyond traditional long or short positions.
• Experienced Management: Direxion's extensive experience in managing leveraged and inverse ETFs positions TSLL's management team to navigate market volatility and potentially outperform competitors.

Financial Performance: TSLL's performance record depends heavily on Tesla's stock price movements. Analyzing historical data reveals periods of significant positive returns when Tesla's stock price rallied, coupled with negative returns during periods of decline. Notably, leveraged ETFs amplify both gains and losses compared to direct investment in the underlying asset.

Benchmark Comparison: Comparing TSLL's performance to the underlying Tesla stock and broader market indices like the S&P 500 showcases the amplified nature of the returns. During periods of positive Tesla performance, TSLL generally outperforms both the stock and the broader market, reflecting the leverage factor. However, during periods of decline, TSLL exhibits larger losses compared to both benchmarks. Investors should be aware that leveraged ETFs aim to magnify daily returns, not perfectly track the underlying asset or benchmark over extended periods like months or years.

Growth Trajectory: TSLL's continued growth prospects depend upon two main factors: Tesla's stock price performance and investor appetite for leveraged exposure. Should Tesla sustain its growth trajectory and investor demand for amplified exposure remains strong, TSLL can expect further growth.

Liquidity:

• Average Trading Volume: TSLL exhibits robust liquidity with an average daily trading volume exceeding 1 million shares, ensuring ease of buying and selling without significantly impacting the market price.
• Bid-Ask Spread: TSLL maintains a reasonably tight bid-ask spread, minimizing trading costs for investors.

Market Dynamics: TSLL's market dynamics heavily hinges on factors influencing Tesla's stock price like its financial performance, competitive landscape, and broader market sentiment towards electric vehicles and technology stocks. Understanding these factors and potential impact on Tesla's performance is crucial for assessing TSLL's future trajectory.

Competitors: Key competitors of TSLL include:

• TECL - Direxion Daily Technology Bull 3X Shares
• ARKW - ARK Innovation ETF
• TQQQ - ProShares UltraPro QQQ

Expense Ratio: TSLL's total expense ratio stands at 0.95%, covering management fees and other operating expenses associated with running the ETF.

Investment approach and strategy:

• Strategy: TSLL utilizes a dynamic replication strategy involving swaps and options to gain 150% exposure to Tesla's daily performance before fees. This leveraged approach amplifies gains and losses relative to the underlying asset.
• Composition: Primarily investing in swap agreements designed to track the daily movement of Tesla's stock price, effectively offering leveraged exposure without directly owning the underlying equity.

Key Points:

• 150% daily leveraged exposure to Tesla's stock price.
• Suitable for active, short-term investors seeking magnified gains.
• Amplifies both potential gains and losses exceeding the underlying asset's movement.
• Higher volatility compared to the underlying asset or traditional ETFs.

Risks:

• Volatility: TSLL exhibits heightened volatility exceeding the underlying asset due to the leverage factor. Investors must tolerate potentially significant fluctuations in its net asset value.
• Market Risk: TSLL directly links its performance to Tesla's stock movement. Negative news, financial setbacks, and overall market sentiment towards Tesla can significantly impact TSLL's performance.
• Short-term Focus: Leveraged instruments like TSLL are inherently not appropriate for long-term buy-and-hold strategies due to compounding effects of daily leverage and potential for tracking errors accumulating over extended periods

Who Should Consider Investing:

• Aggressive investors familiar with leveraged and inverse ETFs seeking potential magnified gains from Tesla's stock price movements.
• Market participants with a short-term trading perspective anticipating Tesla's price movement over a defined timeframe.
• Advanced investors incorporating TSLL strategically within a broader portfolio diversification strategy.

Fundamental Rating Based on AI: 7.5/10

Despite its competitive advantages and impressive market share in the TSLA-focused, leveraged ETF category, a few factors limit TSLL's overall score: Volatility is inherently high due to its leveraged nature. Its expense ratio, while not exorbitant, is slightly higher compared to some competing products. Lastly, as a relatively young ETF launched in 2021, a more extensive market track record with several years’ performance data would strengthen the analysis.