Direxion Daily Small Cap Bear 3X Shares (TZA)

Overview

The Direxion Daily Small Cap Bear 3X Shares (TZA) seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the daily performance of the Russell 2000 Index. It provides leveraged exposure to small-cap stocks, aiming to profit from declines in the Russell 2000.

Reputation and Reliability

Direxion is a well-known issuer of leveraged and inverse ETFs, with a track record of providing these specialized products.

Management Expertise

Direxion's management team has experience in managing leveraged and inverse funds, requiring expertise in daily rebalancing and managing associated risks.

Goal

To seek daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the daily performance of the Russell 2000 Index.

Investment Approach and Strategy

Strategy: TZA uses a leveraged strategy to achieve its inverse exposure to the Russell 2000, rebalancing daily to maintain the 3x leverage. Due to the effects of compounding, longer periods can differ significantly from the target.

Composition The ETF uses financial instruments such as swap agreements, futures contracts, and cash to achieve its investment objective. It does not directly hold stocks.

Market Share: TZA's market share is a small portion of the overall leveraged/inverse ETF market, specializing in small-cap exposure.

Total Net Assets (AUM): 116900000

Key Competitors

• ProShares UltraShort Russell2000 (TWM)

Competitive Landscape

The competitive landscape includes other leveraged and inverse ETFs that target the Russell 2000 or broader small-cap indices. TZA offers triple-leveraged inverse exposure, which can be advantageous for short-term traders but carries higher risk than lower-leveraged alternatives. Because TZA provides 3x leverage, its returns will be magnified over ProShares UltraShort Russell2000 (TWM) which provides only 2x leverage.

Historical Performance: Historical performance can vary significantly depending on market conditions and the ETF's leveraged strategy. Leveraged ETFs can experience large swings in value.

Benchmark Comparison: The ETF's performance should be compared to the inverse of the Russell 2000 Index, magnified by 3x. However, compounding effects will cause deviations over longer periods.

Expense Ratio: 0.95

Average Trading Volume

The average trading volume of TZA is fairly liquid for a leveraged ETF, providing reasonable execution for most traders.

Bid-Ask Spread

The bid-ask spread can vary, but is generally acceptable for a leveraged ETF, which should be considered when assessing trading costs.

Market Environment Factors

Economic indicators, small-cap performance, interest rates, and overall market sentiment influence TZA's performance. Increased volatility in small-cap stocks can lead to amplified gains or losses.

Growth Trajectory

TZA's growth trajectory depends on the demand for leveraged inverse exposure to small-cap stocks, with AUM fluctuating based on investor sentiment and market trends. No fundamental changes in strategy or holdings have been observed.

Competitive Edge

TZA offers a specific niche: triple-leveraged inverse exposure to the Russell 2000. This unique offering can appeal to sophisticated traders looking to profit from short-term declines in small-cap stocks. TZA has high liquidity, providing reasonable executions for most traders. It offers an easy, direct way to gain inverse exposure to small caps.

Volatility

TZA exhibits high volatility due to its leveraged nature, making it susceptible to large daily price swings. The leveraged structure introduces substantial risk, including the potential for rapid losses.

Market Risk

TZA is subject to market risk associated with small-cap stocks, amplified by its leveraged structure. The ETF is not suitable for long-term investment and should be used as a short-term tactical tool.

Ideal Investor Profile

The ideal investor is a sophisticated trader with a high-risk tolerance, seeking short-term profit from declines in small-cap stocks. It is not suitable for buy and hold investors.

Market Risk

TZA is best suited for active traders with a short-term investment horizon. It is not appropriate for long-term investors or passive index followers.

Direxion Daily Small Cap Bear 3X Shares (TZA) is a leveraged inverse ETF that aims to deliver three times the inverse of the daily performance of the Russell 2000 index, designed for short-term trading. Its leveraged structure leads to high volatility, making it suitable only for experienced traders with a high-risk tolerance, and is not suitable for long-term investment. It can be used by these traders to profit from declines in small-cap stocks. Because of its leveraged structure, compounding effects will cause deviations from the targeted inverse returns over longer holding periods.

Data Sources:

• Direxion Funds website
• ETF.com
• Yahoo Finance

Disclaimers:

This analysis is for informational purposes only and does not constitute investment advice. Leveraged and inverse ETFs are complex instruments and involve significant risks. Past performance is not indicative of future results. Consult with a financial advisor before making any investment decisions.