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Gush Stock Continues to Collapses. End of Leveraged ETFs?

GUSH Stock continues to drop and is down an additional 30% today.  DIREXION SHARES ETF TRUST DAILY S&P OIL & GAS EXP & PRD BUL 3X (GUSH) fell 81% on last Monday, or $4.11, to 95 cents during the fall in energy reserves. The ETF had an annual drop of 97% at the close of Monday and fell from a maximum of 52 weeks of $138.20 set last April.

Read More – DRIP Stock Soars.  Is DRIP A BUY?

GUSH, like other energy funds and stocks, is taking an extra beating. The coronavirus and Saudi “price war” has been a perfect mix to drive oil related stocks down. Crude oil prices are bouncing up today, but it may be too little to help energy fund investors. It is a triple leveraged ETF linked to the US energy exploration and production sector and is an extreme example of the risks in triple leverage funds, which are designed to move three times the daily change in the underlying index.

FINRA has recently started looking more closely at leveraged ETFs.  Recently, there have been several lawsuits by investors seeking to recover losses when their financial advisors put them in leveraged ETFs.  Read More – FINRA Cracks Down Non-Traditional ETFs

Given the massive loss of GUSH, many wall street insiders are asking themselves if this is the end of leveraged ETFs for retail investors.

GUSH represents a leveraged move in one of the most volatile stock market groups. There was a massive volume of almost 104 million shares in the ETF on Monday, compared to 22 million shares on Friday.

With energy markets picking up on Tuesday, GUSH rose just 3 cents, or 3%, to 98 cents. The price of West Texas Intermediate crude oil rose $2.63 to $33.76. The value of the ETF had been reduced to $23 million at the close of Monday.

The SPDR oil and gas exploration and production ETF (XOP) fell 37% to $8.15 on Monday, reaching a new 52-week low. He has earned $ 1.75, or 21%, at $9.90 on Tuesday.

GUSH’s mirror, Direxion Daily S&P Oil & Gas Exploration & Production Bear 3X Shares ETF (DRIP), which moves three times the daily inverse of the sector, has shot up this year. It earned $272.85, or 98%, Monday at $549.20, and rose 886% year to date. Its 52-week low was $7 last April. The DRIP ETF has a discount of $116.54, or 21%, to $432.66 in the first trading on Tuesday. So DRIP stock investors have to be very happy. Unfortunately regulators often ignore the winners and only look at investors’ losses when making decisions.

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