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Leverage Shares launches 28 ETPs on heavily traded US stocks


The UK’s Leverage Shares has expanded its range of short and leveraged ETPs listed on the London Stock Exchange to 40, adding 28 new launches based on the most heavily traded US stocks.

The UK’s Leverage Shares has expanded its range of short and leveraged ETPs listed on the London Stock Exchange to 40, adding 28 new launches based on the most heavily traded US stocks.

The ETPs are physically backed and offer daily leveraged and inverse exposures of 2x, 3x and -1x, designed to offer investors the opportunity of making high conviction trades or hedging in companies such as Apple, Microsoft and Google, and consumer discretionary blockbusters like Netflix, Amazon and Tesla.

Oktay Kavrak, Institutional Sales at Leverage Shares, explains that the firm launched as a subsidiary of GlobalX in 2017 but is now independent.

The latest launches come from a research period during which the firm decided not to compete with the existing comprehensive offering in the ETP arena which centres around fixed income, commodities and broad-based indices, but observed that there was a shortage of single stock products in the leveraged and inverse ETP market.

It has begun launching tech heavy ETPs following some of the most heavily traded stocks.

“The biggest benefit is that they trade like any other stock,” Kavrak says. “It’s a simple trade without the operational complexity of trading options and futures and a safer alternative to CFDs.”

The products are aimed at experienced investors and allow for trading techniques hitherto reserved for professional fund managers.

“They can use the short products to hedge existing positions in these interesting times,” Kavrak says. “With coronavirus and the US elections coming up, an investor might have a big exposure to some big names but rather than selling they can use the short version to hedge.”

The leveraged version of these ETPs allows investors to get increased exposure with less capital allocation, but Kavrak reiterates: “They are intended for informed investors which is important as they are daily leveraged products and investors should be mindful of the compounding.”

The Leverage Shares products are physically backed, rather than structured through swaps.

“Competing products use swaps through other banks to offer these exposures which introduce credit risk at some level,” Kavrak says. “So, we innovated on the structure and are the first ETP provider to offer short and leveraged ETPs with physical backing.”

The expense ratio on the products is 75 basis points plus the market standard margin rate. The dedicated market maker is BNP Paribas to provide two-way pricing at tight spreads.

Since the beginning of the year, the 2x leveraged ETP on Amazon is one of the best performing products, easily outperforming the underlying stock.

Current Leverage Shares 2x ETPs have exposure to some of the most popular stocks worldwide, including all of the FAANGs. Since the market bottom on March 23, Facebook, Apple, Amazon, Netflix and Alphabet (Google’s parent company) have subsequently gained an average of 43.20 per cent. Over the same time span, their Leverage Shares 2x ETP counterparts have returned 98.76 per cent (23 Mar – 10 Jun). 

Kavrak says that these ETPs have also managed to weather the storm of the coronavirus crisis, as the Amazon, Apple, and Netflix 2x ETPs have outperformed their underlyings by 39 per cent, 3 per cent, and 7 per cent, respectively, year-to-date, while the Alphabet and Facebook ETPs have only slightly underperformed by 5 per cent and 2 per cent, respectively.

Of all 12 ETPs, the best performer was 2x NVIDIA ETP (+185.11 per cent) and the worst was 2x Netflix ETP (+40 per cent) – while seven of the 12 ETPs gained over 100 per cent from Mar 23rd until 10 June.

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