Trump-Media ETF With Double Leverage Is Coming for Day Traders #NewsETFs

(Bloomberg) — An exchange-traded fund offering double the returns of the volatile Trump Media & Technology Group Corp. is set to start trading as early as next week, in the first such product riding the volatile social-media company.

The T-Rex 2X Long DJT Daily Target ETF, which uses derivatives to deliver two times the daily performance of the stock, is slated for its Wall Street launch under the ticker DJTU, according to Matt Tuttle, who filed for the product. The ETF would carry a 1.05% expense ratio.

The loss-making firm, which trades under Trump’s initials, has been on an unpredictable ride since its March debut through a blank-check merger. Its shares have slumped more than 40% from a January peak.

Wrapping the firm, which is majority-owned by Trump himself, into a double-leveraged ETF is the newest maneuver from upstart firms racing to print investment products connected to the US president, and can be seen as a bid to capture interest from self-directed investors. Leveraged ETFs have been very popular with retail traders who have flocked to meme stocks like Trump Media.

But just as some leveraged ETFs amplify returns on the way up, so, too, do they pile on losses on the way down when markets decline. Earlier this week, a number of them saw double-digit drops amid a wider market selloff, sparked in part by growth fears and elevated stock valuations.

“They are great adrenaline products when the market is hot, as the past 15 months have been. But investors shouldn’t forget volatility is a feature of markets,” said Todd Sohn, senior ETF strategist at Strategas. “And when the tide turns — perhaps such as now — risk is still elevated for these products.”

Earlier this month, Trump Media applied to trademark brands for six investment products focused on “Made in America,” energy independence and Bitcoin. In January, REX Financial and Osprey Funds filed with the US Securities and Exchange Commission for an ETF that would track a Trump memecoin, while Tuttle has an application for a leveraged version based on the token.

Meanwhile, ETF issuers are in an intense battle to launch the next hot thing amid a highly saturated $11 trillion ETF universe in the US, flooded by some 4,000 funds. High-octane offerings have surged in popularity over the past few years, helped by a relentless bull market in stocks.

Of the active funds that launched in January, 61% use derivatives in some way or form, promising to protect against downside or hedging against currency fluctuations, data compiled by Bloomberg Intelligence show. The floodgates can be traced back to 2019 when US regulators eased constraints for launching new funds and the following when they no longer considered some leveraged ETFs to be “complex.”

Mohit Bajaj, director of ETFs at WallachBeth Capital, foresees demand for the product due to active traders interested in the underlying stock. He also acknowledges that risks persist with such funds, and urges investors to take precautions.

“These levered products have been pretty successful,” he said. “This could be another one as well,” he said of DJTU.

–With assistance from Bailey Lipschultz.

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