A major exchange-traded fund provider delves into two popular plays: big tech and weight-loss drug stocks.
In healthcare, Roundhill Investments is preparing to launch a fund focused on companies that produce GLP-1 drugs. Dave Mazza, the company's chief strategy officer, expects to have more information about the fund's debut in May.
“It's going to be important to kind of monitor this space,” Mazza told CNBC's “ETF Edge” this week. “We're going to see some rapid progress in pharmaceuticals. We're already seeing rapid progress of these leaders launching new medicines and new opportunities to market.”
This won't be Roundhill's first new product this year. The company launched leveraged and inverse exchange-traded funds three weeks ago that track widely held technology stocks. They are the Roundhill Daily 2X Long Magnificent Seven ETF (MAGX) and the Roundhill Daily Inverse Magnificent Seven ETF (MAGQ).
MAGX is designed to capitalize on the gains of the “Magnificent Seven,” which include… the alphabet, Amazon, apple, Meta platforms, Microsoft, Nvidia And Tesla. At the same time, MAGQ gives investors a way to bet passively on the group.
“These are tools that can be used for traders who have short-term views on the Seven Wonders – whether positive or negative to express that view,” Mazza said. “If you're bullish, you might be looking at that twice-inflated exposure with MAGX. Or, if you want to hedge your position or take an outright bearish view in the short term, there's MAGQ.”
Both funds reset their performance every day. Therefore, they are considered risky options for investors, according to Mazza.
“You have to be able to view your positions on a daily basis,” Mazza said. “You can hold them for more than a day, but you have to be able to re-evaluate: ‘Is this the right trade for me to engage in?’” “It’s not meant to be done.” Detain them for longer periods of time.”
“You'll get hit a lot.”
Todd Rosenbluth of VettaFi cautions that leveraged and inverse ETFs may not be suitable for every investor due to volatility.
“You really have to go in with your eyes open and understand that every day these devices can perform really well or really poorly,” the company's head of research said. “I like to think of leveraged and inverse ETFs as playing baseball over fences. You'll hit a few home runs. You'll hit a lot.”
Since its debut on February 29, the Roundhill Daily 2X Long Magnificent Seven ETF is up about 7%, while the company's Daily Inverse Magnificent Seven ETF is down about 4%.
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