Which Sectors Have Been The Most Popular Among Short-Term Traders In 2018?

The semiconductor and financials sectors have been two of the most popular sectors among short-term traders in 2018, according to fund flow data from ETF.com.

Looking at the year-to-date fund flows of Direxion ETFs, the largest issuer of leveraged ETFs, the Direxion Daily Financial Bull 3x Shares FAS has had $227.78 million of inflows in 2018, making it the Direxion fund with the most growth this year. That’s followed by the Direxion Daily Semiconductor Bull 3x Shares SOXL, which has seen $168.53 million of inflows, and the Direxion Daily Gold Miners Index Bull 3x Shares NUGT, which has seen $86.59 of inflows.

Interestingly, the Direxion Daily S&P 500 Bull 3x Shares SPXL has had $217.56 million of inflows this year, making it the second most popular of Direxion’s 70 leveraged ETFs.

“If you look at 2017, the growth flow we had in our S&P products for the entire year, we’ve had more than half of that amount in the first few months of this year,” said Sylvia Jablonski, managing director of Direxion. “So that confirms to me that volatility is back, because when volatility is back we see high turnover and we see an increase in absolute activity. So bottom line the funds are picking up with the increase in volatility.”

Leveraged ETFs represent a good way to observe the movements of short-term traders because of their uses as a hedging tool and a way to play immediate volatility, such as earnings season that we’re just coming out of. Jablonski said that specific to earnings, they traders putting the ticker on the day before an earnings announcement and unwind it at the end of that day or the following day.

However, she noted that it can be difficult to come to long-term conclusions from this data alone since the instruments are mostly used for short-term trading.

“With three-beta funds, it’s really hard to come to any conclusions on this because you have people who take the contrarian view, they buy on the dip, and people using the funds to hedge on a position in the short term for a day or two.

“The three-beta products, they’re daily rebalanced, so traders should have a high conviction both on the direction of the underlying index or sector and the volatility,” Jablonski added. Traders should look at a trade as a one day trade, and if they have the same conviction on day two, fine hold the position on day two. But make sure you’re actively checking that position and resetting your outlook on that sector. We always say the trend is your friend with these ETF products.”

Here’s a list of the Direxion funds with the most fund inflows and outflows in 2018, according to ETF.com.

Top Inflows

Direxion Daily Financial Bull 3x Shares FAS $227.78 million
Direxion Daily S&P 500 Bull 3x Shares SPXL $217.56 million
Direxion Daily Semiconductor Bull 3x Shares SOXL $168.53 milion
Direxion Daily Gold Miners Index Bull 3x Shares NUGT $86.59 million
Direxion Daily FTSE China Bull 3X Shares YINN 81.34 million
Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3X Shares DRIP $59.57 million
Direxion Daily MSCI Emerging Markets Bull 3x Shares EDC $55.36 million
Direxion Daily Aerospace & Defense Bull 3X Shares DFEN $45.96 million

Top Outflows

Direxion Daily Small Cap Bear 3x Shares TZA -$92.97 million
Direxion Daily Energy Bull 3x Shares ERX -$35.68 million
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares GUSH -$24.12 million