Direxion Discusses SPCX, TSLA & Rise of Single Stock Leveraged ETFs

**SPEAKER_1** (0:00)
Do you want to really shift gears here, though, and talk about SpaceX and the ETF space? Bring Sam back into the conversation, and welcome in our next guest. Joining us now, Bilal Little, the global ETF strategist at Direxion. Bilal, great to have you on. So you recently launched a 2X inverse SpaceX ETF. Interestingly enough, on the day that the lockup of the $900-plus million shares released into the markets, why was that the right time to give investors a way to bet against SpaceX?

**Bilal Little** (0:32)
Yeah, so one, I don't think we're calling it bet against, right? There's either a bull case or a bear case for the position. And right now, we're witnessing one of the most iconic IPOs come to market. And what it's going through right now is price discovery. Right? There's a lot going on. This is a typical cycle for any type of IPO. They usually trade down after some sort of hype cycle. And now it's actually finding some stability here after actually reporting earnings. And then more intentionally, I think providing additional guidance through not only the end of the year, but obviously, Elon, with his, I would say, exuberance to discuss what the plans are for the company over the next, I would say, three to four years. When it comes to the position that we launched, right? So we have Loft, which is LOFF, which allows the trader to set up a bull case and get 2X exposure to the upside. In this case, LoftD allows the same trader that may have a bear case set up to actually get 2X exposure to the possible downside. So if they would like to actually, to your point, I would say bet against or hedge that particular position, that will allow them to do so.

**SPEAKER_3** (1:29)
So Bilal, explain to our viewers why an inverse ETF then rather than traditional short selling.

**Bilal Little** (1:35)
Yeah, so we got a couple of different things on that. One, for us, it was about building out an entire suite of product offering for the investment trader.
When it comes to SpaceX, I would also say Tesla. We have the largest Tesla ETF as well. So traders that want to trade around Tesla, they typically want to trade around the Elon Musk trade, is what we call it. So instead of going actually just traditionally short, what this does for an individual trader that might have to actually apply leverage and or access leverage that is not readily accessible and or could cost more, they can do so on a simple vehicle which is an ETF, single ticker, they can trade, they can get in and out fairly quickly.

**SPEAKER_1** (2:13)
As we look at the demand that we saw when it came to SpaceX and everyone trying to pile in it almost seemingly at certain points, didn't matter even what the price was for it, as you look at this and it targets the daily inverse return, how much does the compounding matter for somebody who holds the ETF, I mean, for days or weeks rather than one trading session? How are you looking at how this is supposed to be utilized as a tool?

**Bilal Little** (2:42)
Marlon, Sam, this is a phenomenal question and I think it really sets up the purpose of what these products are designed for, right? They are designed for daily hedging and or to get exposure in one way or another and that is in the title. So we want to make that clear to all traders and investors. They're not designed for holding peers that are significantly longer if you actually have a long-term trading or investment horizon. They're designed for daily traders and that's what we point a lot of information back to direxion.com leaning on the education side of that because to your point, if the trade sets up and you would like that compounding to actually work in your favor, let's just say 1% one day and then obviously another percent another day, that basically in consecutive days, you have basically the daily reset of that leverage happening both days. Now that trade cuts against you if that trade goes against you and goes to the downside, especially if you believe that it's a bullish setup. So we need investors to be informed investors and to make sure that they obviously are aware that the way that these products are constructed.

**SPEAKER_3** (3:37)
Okay, so it is like a hedge. Bilal, then what have you seen as far as Musk linked ETF demand, whether it's these inverse ETFs, whether it's leveraged ETFs? I mean, what have you seen and how much has it changed since SpaceX?