This New Market Is No Different Than Sports Betting
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| By Jim Nelson |
Football season is almost here.
That means gambling apps will soon flood the airwaves with ads promoting parlays and betting bonuses.
But you don’t have to be a sports fan to gamble on the market.
And a recent craze has made that easier than ever …
Single-stock ETFs started popping up in 2022.
And they do what their name says. They target individual stocks’ performances … but with a twist.
There are a few kinds. The three most popular are leveraged, income-strategy and inverse ETFs.
As you can imagine, these perform different roles for their investors.
- Leveraged ETFs offer 2x, 3x and sometimes even more returns as the assets they hold. In this case, a single stock.
- Income Strategy ETFs usually use a covered call strategy, which exchanges some potential upside for option income.
- Inverse ETFs aim to go up when the underlying asset (or single stock) goes down.
These types of directional or strategy ETFs have been around for a lot longer. The first ones launched around 2006 or so. But those have mostly focused on indexes or large categories of stocks.
Single-stock ETFs are something else entirely.
Before these came out, the only way to get exponential or inverse performance from a single stock was to buy options.
As for income, you had to sell options. (Like Nilus Mattive and I do nearly every Friday in our Weekend Windfalls publication.)
Now, with the current 264 single stock ETFs on the market, you can gamble without even touching a call or put option.
As you can imagine, these aren’t much more than different ways to gamble.
Though, inverse single-stock ETFs do give you way to short a stock without the hassle of margin.
According to ETF.com, three of the largest by assets under management are the Direxion 2x TSLA ETF (TSLL), the YieldMax NVDA Option Income ETF (NVDY) and the GraniteShares 2x NVDA ETF (NVDL).
Note: The YieldMax MSTR Option Income Strategy ETF (MSTY) deserves its own in-depth dive. But that’s for another time.
Our ratings tend to agree that these might be best left alone for now:
They rate below — and in NVDA’s case, far below — the single stock they are tracking:
So, we suggest you stick to the old, boring way to invest in stocks for now.
But we won’t judge you if you have FanDuel or DraftKings on your phone.
Your editors, of course, would never gamble. Here’s what they are looking at right now …
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Have a great weekend!
Jim Nelson
Managing Editor, Weiss Ratings Daily
