Tripling Out

If only I could leverage the market, TO THE EXTREME!!!!!!

Oh wait, I can now. Hat tip Abnormal Returns.

Market-timers rejoice! Today, Boston-based Direxion officially launched the first group of exchange-traded funds that offer triple leverage, or 300% exposure to market indexes to make bullish or bearish bets. With excessive financial leverage at the heart of the current credit crises, the timing of this launch may surprise some. Over the past several months market participants have experienced unprecedented levels of volatility. With a dynamic regulatory environment, blitzes of weak economic data, credit markets that have yet to fully thaw, and uncertainty surrounding the new administration, it seems as though volatility may remain for some time. For investors looking to magnify market returns with these aggressive products, we can offer some simple advice: Hold on to your hats.

These sound like an awesome idea. Let’s say we have an index that’s 100, and up a pedestrian 3% today. The Triple Latte Inverses will go down to 91. Now on Day 2, said index goes back to 100, unch. in two days. The Triple Latte Inverse only gets back to 98.95. The same round trip in the underlying leaves the Triple Ultra’s at 99.47.

If you’re lucky enough to catch a trend move, you’ll love the Triples. If you miss, or are even mediocre like this trade, look out.

But hey, why stop here. If man can create a TV screen that includes the collective wisdom or 8 Financial Pundits at once, surely man can create Octo-Leverage. And Octo-Inverse-Leverage.