MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD)

Overview

The MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD) is an exchange-traded note designed to provide -3x leveraged exposure to the NYSE FANG+ Index, which includes highly liquid growth stocks of technology and consumer discretionary companies. It aims to deliver three times the *inverse* of the daily performance of the FANG+ Index.

Reputation and Reliability

The issuer, REX Shares, is known for creating leveraged and inverse exchange-traded products, although their reliability depends on the investor's understanding of the risks associated with leveraged instruments.

Management Expertise

REX Shares specializes in complex ETFs and ETNs, demonstrating expertise in structuring and managing these types of products. However, the performance heavily relies on the underlying index's movements.

Goal

To seek daily investment results, before fees and expenses, that correspond to three times (3x) the inverse of the daily performance of the NYSE FANG+ Index.

Investment Approach and Strategy

Strategy: The ETN employs a leveraged strategy, seeking to amplify the daily returns of the inverse of the NYSE FANG+ Index using financial derivatives. It is designed for short-term tactical positioning.

Composition The ETN does not hold physical assets. Its exposure is obtained through swap agreements and other derivatives tied to the NYSE FANG+ Index. This index comprises 10 highly liquid technology and consumer discretionary companies: Facebook/Meta, Apple, Amazon, Netflix, Alphabet (Google), Tesla, Microsoft, Twitter/X, Baidu, and Alibaba.

Market Share: The ETN has a specific niche offering leveraged inverse exposure to the FANG+ Index, making direct market share comparison complex due to varying leverage factors and index constructions.

Total Net Assets (AUM): 68750000

Key Competitors

• ProShares UltraPro Short QQQ (SQQQ)
• Direxion Daily Technology Bear 3X Shares (TECS)

Competitive Landscape

The competitive landscape is characterized by various leveraged and inverse ETFs targeting technology or broader market indices. FNGD focuses solely on the FANG+ stocks, offering a more concentrated exposure, while competitors like SQQQ cover the broader Nasdaq-100. FNGD's concentrated exposure can lead to higher volatility, which is an advantage for some traders but a disadvantage for others seeking broader diversification.

Historical Performance: Due to its leveraged nature and focus on daily returns, long-term historical performance data is not indicative of future results. Results heavily depend on short-term market movements of the FANG+ Index.

Benchmark Comparison: The ETN aims to deliver -3x the *daily* performance of the NYSE FANG+ Index. Direct long-term benchmark comparison is not relevant due to the compounding effects of daily leverage.

Expense Ratio: 0.95

Average Trading Volume

FNGD generally exhibits moderate liquidity, allowing for relatively easy entry and exit for most retail traders, though larger orders may experience some impact on price.

Bid-Ask Spread

The bid-ask spread can vary, but it typically represents a small percentage of the share price, reflecting the costs associated with trading this ETN.

Market Environment Factors

The ETN's performance is highly susceptible to the performance of FANG+ stocks and broader market sentiment. Factors like interest rate changes, economic growth, and technological advancements can significantly affect these stocks.

Growth Trajectory

The growth trajectory is tied to investor demand for short-term inverse exposure to FANG+ stocks. The ETN's assets can fluctuate significantly based on market volatility and investor sentiment.

Competitive Edge

FNGD offers a unique investment strategy by providing -3x leveraged exposure to the FANG+ Index, enabling investors to express bearish views or hedge against potential declines in these prominent tech companies. Its niche focus on a well-defined group of high-growth stocks differentiates it from broader tech or market ETFs. However, the leveraged nature and daily reset mechanism can lead to significant value erosion over longer periods, making it unsuitable for buy-and-hold investors. Its leveraged and inverse nature can amplify gains in the short term but also intensify losses if the market moves against the intended position.

Volatility

FNGD exhibits very high volatility due to its leveraged nature. Daily resets can lead to significant deviations from -3x the cumulative return of the FANG+ Index over longer periods.

Market Risk

The ETN is exposed to the market risk of the underlying FANG+ stocks, along with risks associated with leverage, including compounding and potential for rapid losses. The leveraged nature of the ETN amplifies any negative movement in the underlying index.

Ideal Investor Profile

The ideal investor is an experienced trader with a high-risk tolerance who seeks short-term tactical exposure to the inverse performance of FANG+ stocks and understands the complexities of leveraged products.

Market Risk

FNGD is best suited for active traders seeking short-term tactical positioning and is *not* appropriate for long-term investors due to the compounding effects of daily leverage and the potential for significant losses.

The MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD) is a high-risk, high-reward instrument designed for short-term tactical trading, offering -3x leveraged exposure to the NYSE FANG+ Index. It is not intended for long-term investment due to the effects of daily compounding and the potential for substantial losses. Investors should possess a thorough understanding of leveraged products and actively monitor their positions. It is most appropriate for sophisticated traders with a bearish outlook on the FANG+ stocks.

Data Sources:

• REX Shares Website
• ETF.com
• Yahoo Finance

Disclaimers:

This analysis is for informational purposes only and does not constitute financial advice. Leveraged and inverse ETFs/ETNs are complex instruments and should be approached with caution. Past performance is not indicative of future results. Investors should consult with a financial advisor before making any investment decisions.