New Leverage & Inverse ETF Competition (KBW, KRU, KRS, FAS, FAZ, UYG, SEF)

By now you know all about leveraged ETF and leveraged inverse ETF products.  But you might not have heard of two new leveraged and inverse ETFs that launched from ProShares and KBW Inc. (NYSE: KBW).  Today marked the launch of the first ETFs with leveraged or inverse exposure to the regional banking sector. The ProShares Ultra KBW Regional Banking (NYSE: KRU) ETF and the ProShares Short KBW Regional Banking (NYSE: KRS) began trading on the NYSE Arca today.

The ETFs seek to provide 200% or -100% of the return of the KBW Regional Banking Index for a single day, before fees and expenses.  The KBW Regional Banking Index, the most widely used benchmark for U.S. regional banking stocks, was created and is managed by KBW.

Before today, those seeking leveraged exposure to inverse and leveraged ETFs have usually relied on the crazy triple-leverage ETFs from Direxion: the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) hae seen an increase in volume of late.

There is also the Ultra Financials ProShares (NYSE: UYG) is meant to track the daily move of the twice the daily performance of the Dow Jones U.S. Financials index; and the Short Financials ProShares (NYSE: SEF)  is mean to track the daily investment results of the inverse of the daily performance of the Dow Jones U.S. Financials index.  Now you have leverage, and you have it in regional banks.

There is more and more competition on the leverage and inverse ETF front.  Whether these are winners or losers compared to peers and competitors, that will be seen through time.  As with all leverage and inverse ETF or ETN products, caveat emptor!  These are all prone to index tracking errors.

JON C. OGG