A major exchange-traded fund provider is taking a deep dive into two popular stocks: big-cap tech and diet pill stocks.
In healthcare, Roundhill Investments is preparing to launch a fund focused on companies behind GLP-1 drugs. Dave Mazza, the firm’s chief strategy officer, expects to have more information about the fund’s debut in May.
“It’s very important to keep a close eye on this space,” Mazza said this week on CNBC’s “ETF Edge.” “We’re going to see some rapid advancements in drugs. We’re already seeing those leaders bringing new drugs and new drugs to the market. Rapid advancement of opportunity.”
This isn’t Roundhill’s first new product this year. The firm launched a leveraged and inverse exchange-traded fund three weeks ago that tracks widely held technology stocks. They are the Roundhill Daily 2X Long Magnificent Seven ETF (MAGX) and the Roundhill Daily Inverse Magnificent Seven ETF (MAGQ).
MAGX aims to profit from the “Seven” benefits, which include letter, Amazon, apple, meta platform, Microsoft, Nvidia and Tesla. At the same time, MAGQ offers investors a way to place negative bets on the group.
“These tools can be used by traders who have a short-term view on the Big Seven — whether it’s a positive or negative way to express that view,” Mazar said. “If you’re bullish, maybe consider a 2X exposure to MAGX mouth. Alternatively, if you want to hedge your position or take an outright bearish view in the short term, consider MAGQ.”
Both funds reset their performance every day. As a result, Mazza said they are considered risky options for investors.
“You need to be able to look at your position every day. You can hold it for more than a day, but you need to be able to reevaluate: ‘Is this the right trade for me?'” Mazza said. “They are not intended to be held longer.”
“You’re going to strike out a lot.”
VettaFi’s Todd Rosenbluth warns that leveraged and inverse ETFs may not be suitable for every investor due to volatility.
“You really need to keep your eyes open and understand that these products can perform very well or very poorly on a day-to-day basis,” said the firm’s head of research. “I like to think of leveraged and inverse ETFs as running for the fences in a baseball game. You How many home runs will he hit?. You’re going to be out a lot. “
The Roundhill Daily 2X Long Magnificent Seven ETF is up nearly 7% since its debut on Feb. 29, while the company’s Daily Inverse Magnificent Seven ETF is down nearly 4%.
