VIDEO: ETF of the Week: NVDU & NVDD

On the final episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, sat down one last time to discuss the Direxion Daily NVDA Bull 2X ETF (NVDU) and the Direxion Daily NVDA Bear 1X ETF (NVDD) with Chuck Jaffe of Money Life.

Todd Rosenbluth: So, there’s two of them. We’re going to talk about the Direxion Daily NVDA Bull and Bear ETFs: NVDU and NVDD.

Chuck Jaffe: NVDU, that’s the Direxion Daily NVDA Bull 2X Shares, and NVDD—that’s U for up, D for down—that’s the Direxion NVDA 1X Short Fund. And before we go any further on why these funds now, we want to point out we are taping this before Nvidia’s earnings. So this is not a call on what happened this week in their earnings report, because we don’t have that information. But this is single stock ETFs. And throughout the entirety of the ETF of the Week, once they started doing single stock ETFs, I have been waiting for the moment when we would talk about them. So why these funds, and what do you think of single stock ETFs?

Todd Rosenbluth: So the big question people should have now that Nvidia is reporting is: Will the stock climb higher or fall lower? And ETFs can give you a vehicle to get exposure whether you’re bullish or bearish. We’ve seen retail investors leverage funds from Direxion for years. In fact, they are an industry leader in single stock ETFs as well as leveraged ETFs. We’ve seen growing demand for leveraged ETFs this year. And so I’m intrigued to see whether people will be bullish and use NVDU to gain that upside, or NVDD if they think that Nvidia is going to fall lower. These are two short-term trading tools—short-term being the operative word here. If you want to trade based on an individual company or an industry, then leveraged ETFs can make sense for you. But let me just get the caution out of the way. These funds incorporate daily compounding, which means holding them long-term carries risk if the security changes course. So short-term, these make a lot of sense to me. Intermediate- and longer-term, these can be harmful to a portfolio.