A major provider of exchange-traded funds is taking a deep dive into two popular plays: mega-cap tech stocks and weight-loss drugs.
In healthcare, Roundhill Investments is preparing to launch a fund that will focus on companies developing GLP-1 drugs. Dave Mazza, the company’s chief strategy officer, hopes to have more information about the fund’s debut in May.
“It’s going to be important to watch this space,” Mazza said on CNBC’s “ETF Edge” this week. “We will see rapid progress in drugs. We are already seeing rapid progress from leaders who are bringing new medicines and new capabilities to market.”
This won’t be Roundhill’s first new product this year. Three weeks ago, the firm launched leveraged and inverse exchange-traded funds that track widely held technology stocks. These are the Roundhill Daily 2X Long Magnificent Seven ETF (MAGX) and the Roundhill Daily Inverse Magnificent Seven ETF (MAGQ).
MAGX is designed to profit from the earnings of the “Magnificent Seven”, which includes Alphabet, Amazon, Apple, Meta platforms, Microsoft, Nvidia And Tesla. Meanwhile, MAGQ gives investors the ability to make negative bets on the group.
“These are tools that can be used by traders who have short-term views on the Magnificent Seven, both positive and negative, to express that view,” Mazza said. “If you’re bullish, maybe look at the 2x risk with MAGX. Or if you want to hedge your position or be outright bearish on a short-term basis, there’s MAGQ.”
Both funds reset their performance to zero every day. As such, they are considered a risky choice for investors, according to Mazza.
“You should be able to review your positions on a daily basis. You can hold them for more than a day, but you need to be able to reevaluate, “Is this the right deal for me?” said Mazza. . “They are not intended for long-term storage.”
“You’re going to hit a lot.”
VettaFi’s Todd Rosenbluth cautions that leveraged inverse ETFs may not be suitable for every investor due to volatility.
“You really have to keep your eyes open and realize that every day they can do very well or very poorly,” said the firm’s head of research. “I like to think of credit and inverse ETFs as playing baseball, swinging for the fences. You’ll hit a couple of home runs.. You’re going to hit a lot.”
Since its Feb. 29 debut, the Roundhill Daily 2X Long Magnificent Seven ETF is up nearly 7%, while the company’s Daily Inverse Magnificent Seven ETF is down nearly 4%.
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