Understanding the Direxion Daily Technology Top 5 Bear 2X ETF (TTXD)

What this ETF is trying to do

The TTXD is an exchange-traded fund (ETF) designed for a very specific and complex strategy. It is both a leveraged and an inverse ETF. This means it aims to move in the opposite direction of the top five technology stocks, and it seeks to multiply those movements by two. Because it is an inverse fund, if the technology stocks it tracks go up, this ETF is designed to go down.

What the numbers show

The recent performance data shows significant share-price declines.

• Year-to-Date (YTD): The price return is approximately -58.65%. The total return for this period is approximately -57.18%.

• One-Year: The one-year price return is approximately -53.35%. The one-year total return is approximately -51.29%.

It is important to understand the difference between these two numbers. The price return only tracks how much the share price changed. The total return includes the impact of distributions (cash payments).

Based on an estimated price from roughly one year ago of $24.48, the current price is $11.42.

Income and distribution explanation

TTXD has a distribution yield of approximately 6.76%. Over the last 12 months, there were 5 distributions. The fund usually pays out on a quarterly basis, though recent payments have mostly occurred on Tuesdays.

While a 6.76% yield might seem high, it is important to remember that a high distribution yield does not guarantee that an investor has earned that much in total return. In this case, the total returns for both the year and the year-to-date period are significantly negative.

NAV erosion explanation

This ETF has a severe erosion-risk flag. The data shows an erosion score of 10, which is labeled as "Severe price erosion." This indicates that the fund has experienced a major decline in its market price.

The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion. However, the significant drop in share price is a clear measurement of price deterioration.

Pros

• The fund provides regular cash distributions.

• It offers a way to bet against specific technology stocks using leverage.

Cons

• High Risk: The fund is leveraged and inverse, which can lead to rapid losses.

• Severe Price Decline: The fund has shown very large negative price returns over the last year.

• Erosion Risk: There is a severe erosion-risk flag due to the declining price trend.

Beginner takeaway

TTXD is a highly specialized tool used to bet against technology companies. Because it uses leverage, its price can move very quickly in both directions. Investors should be aware that while the fund pays distributions, the share price has declined significantly, which is reflected in the negative total returns. High yields can sometimes exist even when the share price is falling.