Geared Instruments on iTradeGlobal

Geared Instruments on iTradeGlobal

We do not have CFDs or Futures on our iTradeGlobal platform because there is little demand for it, but there are many geared ETFs on our platform. These are great for short term trading, not for long term investing.

Just type in 2X or 3X in the search box at the top of the iTradeGlobal screen too see the most popular geared ETFs or sort them alphabetically. Both Bull (Long) and Bear (Short) ETFs are available from China to the S&P 500, from Commodities to Bonds.

With CFDs and futures you can lose a lot more than your margin or deposit. How is it then possible to get 3 times gearing without the risk to lose more than your initial cost? Let’s look at an example, the popular Direxion Daily Gold Miners Bull 3X ETF, graph below. This ETF attempts to track the performance of the NYSE Arca Gold Miners Index via futures contracts, short positions, options and similar exotic derivatives. The biggest holdings in the Arca Index are Barrick Gold and Newmont Mining. AngloGold Ashanti is the only S A share in the top10.

The Direxion Daily Gold Miners ETF seek daily investment results (before fees and expenses) of 300% of the performance of the Arca Gold Miners Index for a single day. The funds should not be expected to provide three times the return of the benchmark’s cumulative return for periods greater than a day. In short, the ETF will not include overnight gains or losses, only intraday. It is highly unlikely the Arca Index will lose more than 34% in one day, but then Direxion will have to carry the losses as the buyer of an ETF cannot lose more than 100% of the cost he or she paid. With gearing the risks are big.

From 29 May to 24 June 2019 the Gold price shot up nearly 11%. The NYSE Arca Gold Miners Index increased from 659 points to a high of 826, an increase of 25%. The Direxion 3X Geared Index went from $1 449 to $2 956, an increase of 103%, even better than the 300% of Index it aims to achieve. On the other side of the coin though, the Bear (Short) ETF lost 50% of its value, falling from $2 329 to $1 076. 

With geared instruments you can make profits quicker, but you also lose money quicker. Be careful when trading them.

Gerhard Lampen.

Head Sanlam iTrade

 

 

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