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 A-) and the Direxion Daily NVDA Bear 1X ETF (NVDD A-) with Chuck Jaffe of Money Life. For this last episode, the pair discussed several topics related to the ETFs, in order to give investors a deeper understanding of it.Chuck Jaffe: One fund, on point for today. The expert to talk about it: This is the ETF of the Week!
Welcome to the ETF of the Week, where, for the final time after 14-plus years, we get the latest take from the experts at VettaFi, where they have all the tools you need to be a savvier, smarter ETF investor, and to get more details on the funds that are in your portfolio or the ones we talk about here.
Now, you get that detail when you go to their sister site, ETFDb.com. That’s where you can dig in. That’s also where you’re going to find what becomes the successor to the ETF of the Week podcast. So we have it all linked up where you can go to make sure that you are subscribing if you want more great information from our guest, Todd Rosenbluth.
He is head of research at VettaFi, where, by the way, the company is doing all kinds of things. That’s part of why they’ve made the decision to move on from the ETF of the Week. But again, if you want to find those things, you’re going to ETFDb.com. And they’ll make sure that the ETF of the Week standalone podcast remains active. They’ll put their new things there, so make sure you’re subscribing if you don’t want to miss Todd and what he’s doing next.
But what he’s doing now is chatting with me: Todd Rosenbluth, always great to talk with you!
Todd Rosenbluth: It’s great to be back, Chuck. I’m sorry it’s for the last time in this format, but still excited to be working with you!
Chuck Jaffe: Your ETF of the Week is…
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.
Chuck Jaffe: Yeah. You need to understand what you are buying here or what you are selling here. And it’s not just, “Oh, I believe in Nvidia for the long term, I’m going to do that,” because if you believe in Nvidia for the long term, you’re probably still better off buying stocks or buying options or playing it however you want, rather than using a leveraged fund that’s based on the daily movements of the stock.
Todd Rosenbluth: You’re right. And so, owning Nvidia directly is the easiest way to take advantage of what’s going on in Nvidia’s stock over the longer term. If you have confidence and you’re bullish, then using a 2X single stock leveraged ETF can make sense. If you think the stock is going to fall, using an inverse ETF is a more efficient way than shorting the stock, but you have to be careful with it.
And so let me just — there are a number of products that are out there, a number of single stock leveraged ETFs, in fact, many that are tied to Nvidia. We’re talking about Direxion because Direxion is an industry leader in this space. And they have (SOXL B), which I think might have been an ETF of the Week in the past. That’s a 3X semiconductor bull ETF, and Nvidia is one of the semiconductor stocks you would find exposure to in it.
So that’s why I’m looking at Direxion, because of that. But yes, there are other alternatives for people if they were so inclined to look at a leveraged or an inverse ETF.
Chuck Jaffe: There are. There’s another interesting thing here. So the NVDU, the Direxion Daily NVDA Bull 2X Shares, has over $600 million in assets, but the bear shares, the NVDD, Direxion Daily NVDA Bear 1X Shares, has like $20 million. I’m curious,because we’ve always talked about, like, “Does a fund have to have critical mass?”
But when you are talking about a daily single stock ETF, how important is critical mass there? Because these are trading vehicles, and it’s not quite the same as, like, “Oh, have they gotten their legs under them?” etc. Is there a difference with a single stock ETF, where assets really make more of a difference and matter more?
Todd Rosenbluth: So, I do think you want to make sure that there’s liquidity in an ETF you’re buying. And so assets or trading volume is a good reference point if you’re going to use them for trading purposes. The significant difference between the size of these products is, I think, directly the result of how well Nvidia’s stock has done and how many more people are bullish on Nvidia’s stock, and thus they’ve taken the 2X bullish side of the coin as opposed to the bearish.
And if you were bearish, then you lost out because it has been one of the best-performing stocks—certainly one of the best-performing large-cap stocks—in the last three or five years. And so, I think that’s the case. If you’re asking, should people not buy or not trade the bearish ETF because of its small size, you should be aware that it is relatively small and make sure that the trade that you’re putting in should be reasonable enough relative to the overall size.
I hope you have listeners that have more than $20 million that they’d be investing in ETFs, but I don’t think the way of investing in that is to take a short-term call on one single stock ETF. So I think it’s okay if you are bearish on the stock to use it, or if you actually own Nvidia stock, using the bear ETF can be a way of hedging your exposure in a tactical manner.
Chuck Jaffe: For me, obviously, I would love it if our audience all had more than $20 million and they were investing it that way, but they’re investing small amounts. It’s really more about: If you have less in the fund, is there more distortion? Because again, these are daily ETFs, which means that you can’t look and go, “Oh, there’s a straight-line relationship between what the stock does and what the ETF does,” because there’s leverage and all those other sorts of things. And because of the way they value daily, you can’t go, “Oh, if Nvidia goes up 10% in the next quarter, I’m up 20% because I have the 2X.” It doesn’t work that way.
Todd Rosenbluth: Right. There’s some slippage that happens.
Chuck Jaffe: And so that was my concern with assets. Does it make it so that the distortions can get a little bit bigger? These are trading vehicles, and you’ve made that very clear. But is there for you, a length of time that is, you know, acceptable? Because you don’t want to hold this for the long term, but you don’t necessarily want to be trading every day. You could, but for the average investor, probably not. So is there a point where you go, “Okay, at the end of a week, if you still have it, you want to make sure you would be in it again immediately”?
Todd Rosenbluth: Yeah. So, I do think that even though daily is part of this because they reset and there’s compounding, I think you can go longer than that if you understand the risks — you know, whether it’s a week and then reassess. But you just have to be prepared. Certainly, if you are short, the stock can go up in perpetuity — obviously, over a period of time it can’t, but the stock can. There’s no limit to how high the stock can go up. There is a limit if you’re bullish as to how much you can lose — well, all, I guess — but there’s a downside to that.
So, I do think that if you own these as opposed to trading these, that you need to be looking at them consistently enough that you still feel like this is worth investing in, as opposed to almost every other ETF that we’ve talked about in my more than 100 appearances since doing ETF of the Week, where those are appropriate from a strategic perspective, and tactical is maybe a quarter at a time. If you have this for more than a quarter at a time, you’ve probably lost money.
Chuck Jaffe: Do you believe that single stock ETFs… and obviously we’re talking about Nvidia, biggest market cap, but we’re seeing them on a bunch of different stocks, and we see them seemingly anytime some stock gets hot. I mean, I don’t know that we’ve seen them on meme stocks as they become meme stocks, but pretty close. So is there a size for the stock that matters to you? Not germane necessarily to today’s subject, but is there a, “Like, I would not be doing this on a mid-cap or a small-cap or whatever”?
Todd Rosenbluth: Yeah. Well, so let’s just state the obvious. Nvidia is a $5 trillion market cap company, even though the stock moves around, and certainly the market capitalization will move around. The percentage move of Nvidia stock even when it reported results — again, as you noted, we don’t know what those results are, but I imagine that Nvidia as a stock is trading heavily one way or another as a result.
That’s why we’ve given both sides of this. I think it’s very risky if the underlying stocks inside them are risky; they can certainly move. We have seen single stock leveraged ETFs on companies I’ve never even heard of. I didn’t even know the stock existed, and we now have ETFs that are tied to it. So yeah, I don’t know that there’s a round number that’s there, but this is probably most appropriate for the largest of the stocks that are out there because of the relative stability. People are buying these because they’re willing to take on risk, but you also have to be prepared that you could lose quite a bit with single stock leveraged or inverse ETFs. These are trading vehicles for a reason.
Chuck Jaffe: Glad that we got the subject of single stock ETFs in before we finished up the ETF of the Week! The ETFs of our final week are NVDU — that is the Direxion Daily NVDA Bull 2X Shares — and NVDD — that’s the Direxion Daily NVDA Bear 1X Shares. They are the ETFs of the Week from Todd Rosenbluth at VettaFi.
Todd, it’s been a pleasure. You and I will talk again on Money Life, my show, and I will be among the listeners to what you guys are doing next at VettaFi and ETFdb. But thanks so much for joining me.
Todd Rosenbluth: It’s been a true pleasure. Thanks to you and the audience for listening and considering us credible. Thanks a lot.
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And if you listen to this podcast but you want to hear my side of things, make sure you check out Money Life on your favorite podcast app, or you can find us at MoneyLifeShow.com, because I’d love to keep you as a listener.
Meanwhile, if you want to keep listening to the ETF of the Week, well, it’s going to be morphing. ETFdb and VettaFi have plans, but if you are subscribed here, you will be able to hear what they are doing next as this evolves. So you’ll be automatically subscribed to the new things, and you’ll have access to the ETF of the Week database as well. So make sure you’re subscribed.
And remember, if you’re looking for more information on your ETFs — the ones we just discussed or any that we’ve ever discussed, and things in your portfolio — ETFDb.com has the tools you need to do it right. They’re on X @ETFDb. And Todd Rosenbluth, head of research, my guest, he’s on X as well @ToddRosenbluth.
The ETF of the Week will not be back for you next week, but we hope you will continue listening to great information. And while you’re doing that, happy investing, everybody!
Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
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