CFRA ETF Research Note

Single Stock ETFs Launch in the U.S., Providing Opportunities and Risks

July 18, 2022

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Key Takeaways

  • On July 14, 2022, AXS Investments launched seven ETFs that provide leveraged and inverse exposure to single stocks such as Nvidia, PayPal, Nike, Pfizer, and Tesla. It marks a new phase in the evolution of the U.S. ETF market and is likely the precursor of more products of this type.

  • These ETFs provide opportunities for institutional and retail traders with a strong directional view on a stock to implement their investment thesis through a liquid,  exchange traded instrument.

  • However, these products could be risky for those investors who hold them for long periods without understanding the mechanics of daily rebalancing.

  • Although the ETFs were approved by the SEC, both Commissioner Crenshaw and Lori Schock, the SEC’s Director of Investor Education, released separate statements expressing concerns. Their concerns centered primarily around the daily rebalancing of leveraged and inverse products.

  • Investor education around these products will be critical as they are introduced into the market.

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