By Suzanne McGee
PROVIDENCE, Rhode Island, Sept 9 (Reuters) – If a trading day seems awfully long, one exchange-traded fund provider believes it has just the product for you.
Defiance ETFs is seeking to offer investors 16 funds that aim to double a stock’s return in a single hour — the latest product of the industry’s race to amplify the returns on individual stocks for those who obsess over every twist and turn in Magnificent 7 stocks and other hot investments.
The new products would work the same way as existing 2x single-stock funds, but with a reset that happens at the end of every hour rather than at the end of a regular U.S. trading day, which runs from 9:30 a.m. to 4 p.m. ET.
“They treat the trading day as a single hour instead of a full day,” said Sylvia Jablonski, CEO and chief investment officer at Defiance. The funds, which would be tied to the underlying performance of some of the most widely held and traded stocks and ETFs, ranging from Nvidia and Microsoft to the Roundhill Memory ETF, give investors a way to bet on intraday movements.
Defiance’s U.S. Securities and Exchange Commission filing comes as regulators review a category of funds that includes such leveraged vehicles. The number of leveraged ETFs aiming to deliver double the return on individual stocks over a single day continues to multiply.
If users roll any gains into successive hours, and the market continues to work in their favor, compounding could allow them to capture larger gains over a single day than they would from simply buying the existing leveraged ETFs, Jablonski added.
If, however, the stock reverses course or follows a choppy path to a one-day gain, investors could end up with a loss if they hang on to these hourly products, Jablonski said.
The proposed products, which could begin trading in November if regulators do not object, are another new frontier in leveraged ETFs. The SEC has so far blocked proposed leveraged products offering 3x or 5x the daily returns of an underlying stock.
Retail investors have accounted for most trading in leveraged ETFs, but in its SEC filing, Defiance said the proposed products are suitable only for knowledgeable investors who understand the risks and can monitor their portfolios throughout the day.
The SEC did not immediately respond to a request for comment on the latest filing.
(Reporting by Suzanne McGee in Providence, Rhode Island; editing by Colin Barr and Rod Nickel)
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