Money Morning Options Trading Specialist Tom Gentile has just released the best ETF to buy today to Money Morning Members that could provide triple the gains of the broader markets for short-term investors.
Make no mistake, this is for investors who understand the risks and appreciate Gentile's method of mitigating them. Gentile is an options trader, always looking for fast profits and not often holding positions for the long term.
And his pick is showing some very bullish signs right now thanks to the Fed...
After nearly a decade of bond-buying programs and near zero percent interest rates, the Federal Reserve has already begun to unwind these policies. It's been a slow start with only one quarter-point increase in the fed funds rate to 1.25% in June. The market expects a second quarter-point hike in December, and Fed Chair Janet Yellen confirmed this intention in a recent speech.
Financial stocks like banks react well in a rising rate environment, especially when long-term rates move up faster than short-term rates. Analysis of the yield curve - the difference between long-term and short-term Treasury rates - suggests that long rates will indeed rise faster.
The question is which financial stock is the best one to buy under this scenario. Is it a big bank, a regional bank, or some other financial services company?
With the ETF Gentile is bringing readers today, you don't have to worry about finding that one stock out of hundreds...
Forget the Needle, Buy the Haystack
Gentile says that searching for that single stock - that needle in the haystack - can be a daunting task.
Instead, he recommends removing some of that stress by finding a group of stocks that run together. Not only does it make the selection process easier, but it also reduces the risk of the ups and downs of one single stock. Trading a whole group will let you profit even if one of the stocks is underperforming.
Must See: This Great Depression-Era "Secret" Helped Transform Two Teachers into Millionaires. Read More...
He calls it trading the haystack, not the needle.
The most practical way to do that is with exchange-traded funds (ETFs). They trade as easily as a single stock and do a good job of reducing single stock risk.
But you can't just pick any ETF and expect to beat the market. That's why Gentile is giving readers the following pick. In fact, he thinks it's the best ETF to buy now...
This Is the Best ETF to Buy Today
[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
Based on Gentile's proprietary tools and filters, he identified the top-performing ETFs over the past year. The winner and best ETF to buy right now is the Direxion Daily Financial Bull 3X ETF (NYSE Arca: FAS).
This ETF tracks the performance of large, publicly traded financial services companies - and moves three times as fast as the index it tracks.
It already returned a whopping 39.8% to investors year to date. However, with the current rising rate environment and recent rotation of money out of high-flying technology stocks and into the financial sector, it remains poised for more.
Again, Gentile's recommendations are best suited for more sophisticated investors, and a 3X leveraged ETF like this is not for everyone.
Let's step back for a moment to explain what a leveraged ETF is and how it works.
A leveraged ETF is a fund that uses financial derivatives and debt to amplify the returns of an underlying index. It is rebalanced daily, and that has important implications.
When the underlying index for a bullish leveraged ETF such as this one rises in price, holders are very happy. Their return is magnified for each day.
However, when the underlying index moves lower, the losses also magnify. The real risk is that the daily rebalancing process creates a natural downward bias in price.
Let's use an extreme example to illustrate. If the underlying index moves up in price 10% in one day, the 3X leveraged ETF will gain 30%. So far, so good. However, if it drops 10% the next day, the leveraged ETF will drop 30%. Straightforward, right?
Not exactly. The ETF fell from a higher perch and the percentage decline results in a larger dollar loss than the gain made the day before.
In a rising market, all is well. But in a flat market, the value of any leveraged ETF, whether bullish or bearish, will erode.
Now, if the financial sector of the market reacts positively, as we think it should, then the total gains will swamp the daily drawdowns when they occur.
Leveraged ETFs provide tremendous opportunity, but they must be used in short-term strategies by risk-tolerant investors. If you understand the risks, allocating a small portion of a portfolio can provide extra returns on top of an already strong year.
A Brand-New Way to Profit Every Week
When it comes to making money, Tom Gentile likes to keep things as fast as possible.
So he's invented a brand new way you could pocket $1,000, $1,500, even $2,000 in just four days or less.
And he's ready to reveal how you can play these fast cash paydays Monday to Friday, every single week. Click here now...