FAZ
3x Short
Direxion Daily Financial Bear 3X Shares
Shorts: Financials (XLF)
Expense Ratio
1.07%
Leverage
3x Inverse
Issuer
Direxion
Inception
Nov 2008
High Risk Leveraged Product
FAZ is a 3x leveraged inverse ETF designed for short-term trading only. Daily rebalancing causes significant decay over time. NOT suitable for buy-and-hold investors.
What FAZ Shorts
The Direxion Daily Financial Bear 3X Shares (FAZ) is designed to deliver -300% of the daily performance of the Financial Select Sector SPDR Fund (XLF).
It uses swaps and other derivatives to achieve its daily 3x inverse leveraged goal, making it a tool for short-term bets against major U.S. financial stocks.
Key Risks
- Leverage Decay & Compounding Risk: Daily reset causes returns to diverge from 3x the inverse of XLF's return over periods longer than one day, especially in volatile markets.
- High Expense Ratio (1.07%): The cost of the fund's complex derivatives strategy erodes returns over time.
- Sector-Specific Risk: Concentrated exposure to the financial sector, which can be impacted by interest rates and regulation.
- Extreme Volatility: The 3x leverage magnifies losses; the fund can lose most or all of its value rapidly.
- Strictly Short-Term Instrument: Not suitable for buy-and-hold investing due to the effects of daily compounding.
Best Use Cases
- Short-term hedging for investors with long positions in financial stocks.
- Sophisticated, active traders making tactical bearish bets on the financial sector for a single day or a few days.
- Expressing a high-conviction, leveraged view on impending negative news for banks and financial services.
Similar Instruments
Frequently Asked Questions
Is FAZ a good long-term investment?
No. FAZ is designed for daily performance only. Due to compounding effects in volatile markets, holding it for more than one day can lead to results that differ significantly from -300% of XLF's return over that period, often with severe decay.
What does FAZ short?
FAZ aims to deliver -300% of the daily return of the Financial Select Sector SPDR Fund (XLF), which holds large U.S. financial companies like JPMorgan Chase, Bank of America, and Berkshire Hathaway.
Who should consider trading FAZ?
Only experienced, active traders who understand leveraged and inverse ETFs, can monitor positions daily, and can tolerate extreme volatility and the risk of total loss.