CA - AAPU: This Leveraged Play On Apple Common Stock Will Have Its Time
2024-06-27 08:00:00 ET
Summary
- Direxion Daily AAPL Bull 2X Shares ETF (AAPU) offers leveraged exposure to Apple Inc., relying heavily on futures contracts and swaps.
- In this article, I talk about two key aspects of leveraged ETFs and how to play them.
- Volatility and momentum, the two aspects, are crucial when using leveraged ETFs such as AAPU to maximize returns.
- AAPU's performance is dependent on AAPL's momentum, making it a risky investment that requires careful monitoring and understanding of market trends.
The Direxion Daily AAPL Bull 2X Shares ETF ( AAPU ) might look like it represents attractive exposure to Apple Inc. ( AAPL ) common stock without having to pay the heftier price, but is that really the case? On the surface, AAPU’s YTD return of 22% might look attractive against AAPL’s 8.6% or even the S&P 500’s ( SP500 ) 14.7%, but that’s meaningless unless you know what such an investment involves - the volatility risks and the elevated risk of owning leveraged ETFs for prolonged periods. As for the basics, AAPU comes with an expense ratio of 1.04%, which is reasonable for the kind of returns you’d expect, but the fund invests very little in AAPL directly. As I understand it, most of the fund’s performance relies on futures contracts and swaps, with heavy weighting toward the former....
AAPU: This Leveraged Play On Apple Common Stock Will Have Its Time