Friday’s trading day is going to see very few equities emerge without a lot of bruised knees and torn clothes. But at least two exchange-traded products should get through Friday smelling like roses: the ProShares Trust Ultra VIX Short Term Futures ETF (NYSEARCA:UVXY) and the Direxion Daily Gold Miners Index Bull 3x Shares (NYSEARCA:NUGT).
The S&P 500 and just about every other broad stock index in the world is getting crushed following the United Kingdom’s “leave” vote on a referendum over whether the nation would stay in the European Union.
This could end up as one of the worst (if not the worst) trading day of the year so far. Financials are getting killed, as evidenced by the 5% premarket losses in the Financial Select Sector SPDR Fund (NYSEARCA:XLF). Big tech is off. The pound is suffering record losses.
To quote Jon Bois, “All is lost. All is lost. All is lost. All is lost. All is lost.”
However, two funds are making an absolute killing today, and should today trigger a longer global correction (as many fear it will), they could end up making quick-reflexed traders a mint:
ProShares Trust Ultra VIX Short Term Futures ETF (UVXY)
The UVXY is one of a number of trading tools meant to leverage that enemy of the stock market, volatility. Specifically, the UVXY attempts to return (after fees) double the daily performance of the S&P 500 VIX Short-Term Futures Index.
The index itself looks at VIX futures — a way to monitor implied volatility — to track any changes in expectations for the next month.
The plain-Jane way to play this is via the iPath S&P 500 VIX Short Term Futures TM (ETN) (NYSEARCA:VXX), which simply tracks the index itself.
UVXY is a juiced-up version. To wit, VXX is up roughly 12% as of this writing, and the UVXY is up more than 22%.
Direxion Daily Gold Miners Index Bull 3x Shares (NUGT)
The NUGT is another leveraged fund — this time a 3x play on gold mining stocks.
While gold miners are hardly a direct investment in gold itself, they’re necessarily extremely sensitive to movements in the price of gold, as that determines their ability to turn a profit. In fact, the plain Market Vectors Gold Miners ETF (NYSEARCA:GDX) typically moves much more violently than gold, as illustrated by the 6% gain in GDX today on the 4% rise in the SPDR Gold Trust (ETF) (NYSEARCA:GLD).
The NUGT just takes that two steps further, providing approximately triple the returns of the gold mining index that GDX follows. As of this writing, NUGT was up nearly 20%.
A Note About NUGT and UVXY
If you haven’t already gathered, the NUGT and UVXY are complex, fast-moving trading vehicles that aren’t meant for mom-and-pop investors. These are quick ways to make a buck, but they’re also quick ways to lose your shirt.
Even intraday trading in these funds can be perilous — NUGT opened near $125, dipped to below $113 and shot back up to around $118, all within a few minutes of the open.
However, if you think today’s Brexit pessimism is going to extend into the coming weeks and days, NUGT and UVXY are among the most concentrated bets you can make.