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Race Is On to Launch Leveraged ETFs for Single Stocks Like Tesla

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Direxion has set off a race to deliver the first U.S. exchanged-traded funds that would allow investors to make leveraged bets on single stocks.

The asset manager, one of the biggest providers of leveraged ETFs, is planning 24 new funds that would offer the inverse, double the inverse or double the gain on single companies including Tesla Inc. and Meta Platforms Inc., according to Thursday filings with the Securities and Exchange Commission.

That comes a week after AXS Investments filed for 18 new funds that would also offer double the inverse or gain on single companies.

“There’s this sort of interesting arms race taking place in the registration world for these single-stock leveraged ETFs,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “I feel as though AXS might just be taking a shot, and then Direxion is like, ‘well hey this is our territory, we better take a shot too just in case.’”

Leveraged and inverse ETFs use derivatives to amplify returns, reverse performance or both, and they typically target an index or a fund. They were falling out of favor after featuring in a number of market blowups in recent years, but demand is rising again as investors ride the recent market volatility.

Direxion’s planned lineup will also offer exposure to Netflix Inc., Apple Inc., Microsoft Corp., Inc., Alphabet Inc. and Nvidia Corp., according to the filings.

It’s unclear if regulators will approve the products. Precidian ETFs Trust filed in 2017 for a slew of ETFs that each corresponded with the American depositary receipts of a foreign company, but the funds are still pending with the SEC.

Similar to efforts to deliver a spot Bitcoin ETF, though, regulatory uncertainty is not stopping fund issuers from trying.

“If it gets approved, you’re looking at a whole new category,” Balchunas said. “I think, ‘okay, we’re done,’ and then boom — ETFs invent a new category.”

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