Frequently Asked Questions

Trading spreads, or the bid ask spread, is the difference between the best price a buyer is willing to pay for a security (bid) and the best price a seller is willing to sell that same security (ask). The bid ask spread depends greatly on the liquidity of the asset. If it is a heavily traded security the spread will tend to be very narrow (i.e., 1 or 2 pennies), which cuts back on transaction fees. Less liquid or more thinly traded securities may have wider spreads.

The important thing to remember is that ETFs generally trade close to their fair value, and premiums or discounts tend to be short-lived. Confusing as it seems, ETFs have more than one "price."

First, there is the actual value, which is measured by net asset value (NAV) at the end of each day and by intraday NAV (iNAV) during trading hours.

However, because ETFs trade on an exchange, they also have a current market price—which could be more or less than the actual combined value of the holdings of the fund.

In short, if the price of the ETF is trading above its NAV, the ETF is said to be trading at a “premium.” Conversely, if the price of the ETF is trading below its NAV, the ETF is said to be trading at a “discount.” In relatively calm markets, ETF prices and NAV generally stay close. However, when financial markets become more volatile, ETFs quickly reflect changes in market sentiment, while NAV may take longer to adjust—resulting in premiums and discounts.

Learn more about ETF Market Pricing.

No, none of our ETFs generate a K-1. All of our ETFs generate a 1099 for tax reporting purposes.

Learn more about Understanding Taxable Distributions

ETFs, including Direxion ETFs, are generally available through any brokerage platform. Talk to your financial advisor to explore whether Direxion ETFs may fit your investing goals.

Most foreign investors need to open a U.S. Domiciled account to access Direxion ETFs. Talk to your financial advisor to explore how to access Direxion ETFs.

ETFs have annual expenses passed on to the investor from the managing fund company. Like any typical business entity, an ETF company may incur a range of operational expenses, including management fees and marketing costs. These costs are passed on to the shareholders of the ETF and are expressed as a percentage called an expense ratio.

An ETF’s expense ratio tells an investor how much they’ll pay over the course of a year to own the fund. For example, if an ETF’s expense ratio is 0.20%, the investor’s cost to hold the fund over the course of a whole year is $20 for every $10,000 invested.

No. We are not an options trading principal. Options contracts are a separate security from the underlying security they target. Questions about options contracts should be addressed to the options exchange and/or your trading platform.

Direxion does not dispense tax advice. Please discuss with your accountant, or refer to the helpful links below:

• Distribution Schedule
• Understanding Taxable Distributions

No, this is not recommended. Leveraged ETFs seek daily investment results and should therefore be considered primarily for short-term trading purposes. It may, however, be appropriate to hold the funds for periods longer than a single day depending on the performance path of the fund's underlying benchmark index and the investor's risk tolerance. Investors who choose to hold leveraged ETFs for periods longer than a single day should recognize that their holding period is not in line with the fund's investment objective and such investors should regularly monitor and adjust their position to maintain a level of exposure consistent with their investment objective.

To obtain the necessary exposure, Direxion Daily Leveraged and Inverse ETFs will invest all or a portion of their net assets in derivatives— typically swaps or futures. These derivatives are agreements that provide the ability to gain exposure to respective indexes and sectors without the need for full dollar-for-dollar investment. The Bull Funds will generate between 10% and 100% of their requisite exposure level from equities and the remainder from derivatives. The Bear Funds generate their entire -100%, -200% or -300% exposure through derivatives. Direxion rebalances exposure daily by buying or selling swaps to ensure that each fund tracks as closely as possible to 300% or 200% for a Bull Fund, or 300%, 200% or 100% of the inverse for a Bear Fund, of the benchmark index’s daily performance.

Click here for a full list of our Leveraged & Inverse ETFs.

For Leveraged and Inverse ETF only, Direxion uses swap contracts (swaps) to obtain additional exposure, or inverse exposure, to the benchmark indexes that the funds track. A swap contract is a derivative in which two counterparties agree to exchange one stream of cash flow for another stream. These streams are called the legs of the swap. The cash flows are calculated over a notional principal amount, which is usually not exchanged between counterparties. Consequently, swaps can be used to create unfunded exposures to an underlying asset, since counterparties can earn the profit or loss from movements in price without having to post the notional amount in cash or collateral. Direxion uses Total Return Swaps.

Direxion rebalances exposure daily by buying or selling swaps to ensure that each fund tracks as closely as possible to 300% or 200% for a Bull Fund, or 300%, 200% or 100% of the inverse for a Bear Fund, of the benchmark index’s daily performance.

No, not typically. For example, the investment objective of a Direxion Daily 3X ETF is to seek investment results of 300% (or -300%), before fees and expenses, of the daily performance of its benchmark index. This is a daily objective and does not apply to longer periods of time. The actual longer-term performance may be close to the daily targets of 300% (or -300%)—but depending on certain market movements and due to the portfolio adjustments required to pursue the daily investment targets set by the fund, performance over time may vary. This will, in some cases, be to the advantage of the shareholder and other times, it will be to their disadvantage.

In markets predominantly trending in one direction with low volatility, the performance for periods longer than a single day may exceed the return of the index, multiplied by the target beta (e.g. -3X, -2X, 2X, 3X) of the portfolio. However, in volatile markets, the pursuit of daily investment targets will typically have a negative impact on the performance for periods longer than a single day.

Click here, to learn more about why Volatility Matters.

Direxion Daily ETFs seek daily investment results. As described in the question above, over longer periods of time, especially when markets experience significant market volatility, investment results can vary. The path of the benchmark index during these longer periods may be at least as important to the fund's return as the cumulative return of the benchmark for the period. As a result, even though the benchmark index had a positive return, a bull fund that tracks it can have a negative return, due to the product of the daily events that take place during the period.

Watch our Understanding Leveraged & Inverse ETFs video series to learn more.

If a Fund’s underlying index moves more than 30% on a given trading day in a direction adverse to the Fund, the Fund’s value would go to zero. The Funds’ investment adviser, Rafferty Asset Management, LLC, will attempt to position each Fund’s portfolio to ensure that a Fund does not gain or lose more than 90% of its net asset value on a given trading day. Consequently, a Fund’s portfolio should not be responsive to underlying index movements beyond 30% on a given trading day, whether that movement is favorable or adverse to the Fund. For example, if a Bull Fund’s underlying index were to gain 35% on a given trading day, that Fund should be limited to a gain of 90% for that day, which corresponds to 300% of an underlying index gain of 30%, rather than 300% of an underlying index gain of 35%.

It is important to understand that an investor in Direxion ETFs cannot lose an amount greater than their initial investment.

*This is a hypothetical example and investors return may not replicate this example

Ordinarily, yes. But when we see this type of daily performance discrepancy, it is commonly due to the fund trading at an abnormally large price premium (as compared to the fund's NAV) at the time of the market close. This is usually caused by a higher demand for shares than are currently available in the market. That is, there are more interested buyers than there are sellers of shares in the market at that time. The result is a temporary inflation of the market price for the fund. This means that those investors who bought shares at this premium paid more than the actual net asset value per share, or more than the actual value of the underlying holdings per share in the fund. The disadvantage of buying at a premium is that the investor will essentially be "selling" a portion of the fund's returns to the buyer. This is the reason for the difference in the expected daily returns that can sometimes be seen.

The good news is that this situation is typically resolved relatively quickly. Historically, we've often seen that, as new shares are introduced to the market, supply and demand come back into relative balance and the price premiums ordinarily decline.

ETF shares trade on the open market throughout the day on securities exchanges. Direxion does not have any control over how they trade—whether at a premium or a discount. As mentioned above, at times when supply is lower than demand, the shares can trade at significant premiums. We do recommend that when investors are considering a trade in any ETF, they check to see if the shares are trading at excessively large premiums or discounts and consider the impact of this on their investment.

Intra-day, the total exposure of a Fund may be higher or lower than the stated daily objective depending on the movement of the target index away from its value at the end of the prior trading day.

After a move in the index that is favorable to the fund - either up for a bull fund or down for a bear fund - total exposure will decline below the daily stated objective. Conversely, if the value of the index moves in a direction that is unfavorable to the fund - either down for a bull fund or up for a bear fund - total exposure would rise above the stated daily investment objective. This occurs because, although the net asset levels of the fund and the total exposure to the index move directionally together, the rate at which they move is disproportionate as a result of leverage.

On days when market fluctuation is minimal, the intra-day changes to exposure levels are small. However, on days when there is substantial fluctuation in the value of the benchmark index, the intra-day changes to exposure levels could be greater. Learn more about pursuing daily targets in volatile markets.

No. Your losses are limited to your initial investment.

Read our Four Rules to Trade By to learn more.

The Direxion Daily Gold Miners Index Bull and Bear 2X Shares seek daily investment results, before fees and expenses, of either 200%, or 200% of the inverse (or opposite), respectively, of the performance of the NYSE Arca Gold Miners Index. These funds track a commodity related equity index, consisting of a basket of gold miner related stocks. They do not invest in physical commodities and should not be expected to directly track the price performance of gold.

Direxion Daily S&P Oil & Gas Exp. & Prod. Bull and Bear 2X Shares seek daily investment results, before fees and expenses, of 200%, or 200% of the inverse (or opposite), respectively, of the performance of the S&P Oil & Gas Exploration & Production Select Industry Index. They do not invest in physical commodities and should not be expected to directly track the price performance of oil and gas commodities.

We issue press releases several weeks prior to the pending splits. Please review our News/Press Releases page on our website periodically and sign up to receive announcements in advance of any splits or pending corporate actions.

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Anyone who owns shares of an ETF affecting a reverse or forward split at the close of the markets on the record date will participate in the split.

No. The total value of your investment will not change. A split simply means there will be a reduction (reverse split) or addition (forward split) in the number of the ETF’s shares outstanding and a proportionate increase (reverse split) or decrease (forward split) in the ETF’s price per share. This means that your total number of shares owned will change; however, the aggregate value of those shares will remain the same as before the reverse or forward split. The exception to this is the case when, as a result of a reverse split, a shareholder receives fractional shares of an ETF. Fractional shares cannot trade on the ETF’s listing exchange. Thus, an ETF will redeem for cash a shareholder’s fractional shares at the ETF’s split-adjusted net asset value (NAV) after the close of the markets on the record date.

It depends on the split ratio for the ETF. Here are a couple of examples:

The table below illustrates the effect of a hypothetical 1-for-5 Reverse Split

The table below illustrates the effect of a hypothetical 5-for-1 Forward Split

No, we do not expect splits to affect availability or liquidity. Shares are expected to trade with normal availability and liquidity.

Splits and reverse splits will not create a taxable event, except in the case where partial shares are created and must be redeemed.

FAfter a reverse split, a shareholder of the ETF could potentially be left with a fractional share. However, fractional shares cannot trade on the ETF’s listing exchange. Thus, an ETF will redeem for cash a shareholder’s fractional shares at the ETF’s split-adjusted NAV after the close of markets on the record date. Such redemptions could cause a shareholder to realize a gain or loss. No transaction fee will be imposed on shareholders for such redemptions.

Forward splits will not result in a taxable transaction for holders of the ETF’s shares and no transaction fees will be imposed on shareholders in connection with forward share splits.

Direxion believes it is in our shareholders’ best interests to affect forward or reverse splits to keep an ETF’s price in a convenient trading price range. In the instance of a reverse split, Direxion expects the costs associated with trading its ETFs to decrease due to the split. The bid-ask spread is expected to decline as a percentage of the price paid per share. For instance, a penny spread on a $5 stock is 20 basis points¹ (.2%), while a penny spread on a $50 stock is 2 basis points (.02%). Further, the commissions charged by brokers who assess their clients on a per share basis will be smaller as investors will need to buy or sell fewer shares to meet their investment goals. In short, Direxion believes that the reverse splits will adjust the share prices to a more cost-effective level for an ETF’s shareholders. In the case of forward splits, Direxion expects the reduction in the NAV will be beneficial for shareholders as the price per share has gotten too high to be convenient for traders.

¹ A basis point can be summarized as follows: 1% change = 100 basis points. 0.01% = 1 basis point

Yes. Splits will cancel limit and GTC orders. Investors should replace these orders and adjust them to the post-split price. Please note, splits may also affect orders for options as well.