Navigating Single-Stock ETFs: A Guide for the Sophisticated Trader

 In Resources

In today’s volatile markets, experienced traders are always seeking an edge — a means to not only uncover new opportunities, but efficiently execute on them. Single-stock ETFs provide exposure to the daily performance of an individual reference stock, through the strategic use of derivatives.

Keep in mind, single-stock ETFs are short-term trading tools for experienced investors — these are NOT buy-and-hold investments. Therefore, it’s critical to fully understand how these products work and how they can be used to help achieve your short-term investment goals.


What Are Single-Stock ETFs?

Single-stock ETFs track the performance of a singular underlying security by employing swap contracts. Swaps are financial agreements where two parties exchange cash flows or assets over a specified period. Swaps can be traded on various asset classes like interest rates, currency, commodity, broad equities, credit default, and in this case, single stocks. Swaps are traded directly between parties, customized to their needs, and subject to counterparty risk. ETFs based on single stocks can be offered to provide multiplied returns of a stock’s daily performance, making them a powerful instrument for sophisticated traders looking to capitalize on short-term market movements.


Leveraged and Inverse Exposure

In the US Single-stock Leveraged and Inverse ETFs have varying levels of leverage and inverse leverage.  T-REX suite of single-stock ETFs only offer 200% and -200% exposure to single stocks. T-REX products are linked to stocks such as Tesla (TSLA), Nvidia (NVDA), Alphabet (GOOG), Apple (AAPL), and Microsoft (MSFT).


Advantages of Single-Stock ETFs

These ETFs are flexible and liquid, easily traded within a standard brokerage account without the complexities of margin borrowing or options trading. They can come at a lower cost of capital compared to executing complex options strategies, the cost of margin associated with leverage at brokerages, and carry potential tax efficiencies within the ETF wrapper.


Risks of Single-Stock ETFs

Single-stock ETFs do not come without risks. There is significant risk of magnified losses for traders that do not understand how they work. If single-stock ETFs are held for longer than a day, returns may diverge substantially from the stock’s share price as a result of daily rebalancing and the risk of compounding. Single stock ETFs require an active management approach and are best suited for those who understand the risks and potential consequences involved.


Before diving into single-stock ETFs, take the time to conduct your own thorough research and consult with trusted financial professionals on the distinct advantages and challenges these may pose.


Ready to dive into Single Stock ETFs?

REX Shares and Tuttle Capital have partnered to create the T-REX Single-Stock ETFs, the first  2x and -2x single stock ETFs in the US to help meet this demand for precision tools.

If you have additional questions on our products, feel free to schedule a time with a member of our team below.




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