Direxion is a renowned player in the leveraged and inverse leveraged ETF world, alone possessing about two-fifths of the funds in the space. The issuer is showing no signs of slowing down as it lately rolled out three leveraged ETFs, targeting the U.S. market.

These ETFs, namely Direxion Daily 7-10 Year Treasury Bull 2X Shares (STYL). Direxion Daily Small Cap Bull 2X Shares (SMLL) and Direxion Daily Mid Cap Bull 2X Shares (MDLL) hit the market on July 29, 2014. Below, we take a brief look at these new products for investors who are looking to make a bullish bet on any of these important market segments:

2x Treasury Bull STYL in Focus

This fund looks to give investors double the performance of the NYSE 7-10 Year Treasury Bond Index on a daily basis. The approach results in a focus on U.S. long-term treasury bonds, charging investors 90 basis points a year in fees, while the fund’s net expense ratio stands at 60 bps a year (read: Long-Term Treasury Bond ETF Investing 101 ).

Across the spectrum of the yield curve, the short-dated bonds remained out of favor since the economy picked up momentum from Q2 and the Fed Chair hinted at wrapping up the bond-buying program by this October and hiking short-term interest rates next year.

Though the Fed Chair indicated at keeping the short-term rates at rock-bottom levels for a ‘considerable period of time’, the improvement in job, inflation and activity data raised the apprehension of a rise in short-term rates. As a result, yields are rising on the low-and-middle end of the yield curve rather than the high end (read: 3 Long Term Bond ETFs Surging as Rates Stay Low ).  

Also, the stock markets might see some volatility once the Fed fully withdraws its supportive hand this autumn which in turn might brighten the appeal for bond investing. Already the S&P 500 index registered a  monthly decline in July thanks to rising rate concerns (among other factors). This scenario might have been part of the reason that propelled Direxion to go for a long-duration Treasury bond ETF. 

As far as competition goes, ProShares Ultra 7-10 Year Treasury Fund ( UST ) might pose as a tough rival as this fund follows exactly the same approach as STYL. The fund is quite popular among investors also. Apart from UST, there many other players in the space but most are with different leverage quotients and duration.  

2x Small Cap Bull SMLL in Focus

This fund seeks to track double the performance of the Russell 2000 Index on a daily basis. The result is a fund that zeroes in on small cap U.S. companies, charging investors 96 basis points for this exposure. The fund’s net expense ratio stands at 60 bps a year.

As the U.S. economy expanded at a 4% annual pace in Q2 relative to expectations of 3% growth and the Q1 decline of -2.1%, a look at the smaller capitalization is warranted. Gains in consumer spending, inventory investments, spending by businesses and even the government led to such stellar performance (read: 3 Small Cap Sector ETFs Leading the Market ).

Small caps are normally focused at the domestic economy which helps this capitalization level deliver better than their more globally exposed peers i.e. large caps, especially with innumerable woes hitting the global economy this year.

After all, geo-political concerns and their impact on the large caps are undeniable. A stronger dollar is yet another concern for large caps having operations beyond the border. This should help the newly launched small-cap ETF put up some gains ahead. Notably, Russell 2000 index added about 5.3% in June.

The small-cap space is congested enough with regular and leveraged funds. Direxion itself has products like Direxion Small Cap Bull 3X Shares 2013 Russell 2000 ( TNA ) and Direxion Small Cap Bear 3X Shares 2013 Russell 2000 ( TZA ). Proshares also has some products in the concerned space namely Ultra Russell2000 ( UWM ) and ProShares UltraShort Russell 2000 ( TWM ).

2x Mid Cap Bull MDLL in Focus  

This fund employees a double leverage strategy to the S&P Mid Cap 400 Index on a daily basis. MDLL charges 94 bps in fees as gross expense ratio while net expense ratio comes in at 60 bps.

While small-caps should perform well in a trending U.S. economy, this capitalization level always carries above-average risks. The Fed is set to end its monthly asset purchases in October leading to a fear of gradual cease in cheap dollar inflows (read: 3 Impressive Mid Cap ETFs to Buy Now ).

Also, the upcoming mid-term elections in November 2014 can result in considerable volatility and corrections in the market. The Fed has also raised some concerns over stretched valuation of the small-cap segment. In such a situation, investors having less appetite for risks might try out the mid-cap segment to earn smart returns while taking protection against volatility.

The mid-cap segment is often a missed-out zone of the investing world. It takes a middle-of-the-road approach between small and large caps. Though there are a plenty of ETFs in the mid-cap segments, these are mostly unleveraged. Leveraged options are still scarce with UltraPro MidCap400 ( UMDD ) and Ultra Russell MidCap Growth ( UKW ) being some available options.

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