Direxion Daily Financial Bear 3x Shares (FAZ) seeks to deliver -300% of the daily performance of the Russell 1000 Financial Services Index, which measures large-cap U.S. financial companies including banks, insurance companies, real estate investment trusts, and diversified financial services firms.
How It Works
FAZ uses derivatives including swaps, futures contracts, and short positions to achieve inverse leveraged exposure to financial sector stocks. The fund rebalances daily to maintain its -3x target, meaning it resets its leverage ratio every trading day. This active management approach requires constant portfolio adjustments as underlying financial stock prices fluctuate. Holdings consist primarily of derivative instruments rather than actual financial sector stocks.
Key Features
- Provides -300% daily exposure to financial sector, amplifying profits when banks and financial companies decline significantly
- Daily rebalancing ensures precise -3x leverage each trading day but creates compounding effects over longer periods
- Concentrated bet against major financial institutions like JPMorgan Chase, Bank of America, and Berkshire Hathaway
Risks
- This ETF can lose value rapidly if financial stocks rise, with potential for 30%+ daily losses during strong financial sector rallies
- Daily rebalancing causes compounding decay—even if financials end flat over multiple days, FAZ typically loses value due to volatility
- Extreme volatility risk as -3x leverage amplifies every market movement, making this unsuitable for risk-averse investors or retirement accounts
Who Should Own This
Designed exclusively for sophisticated day traders and short-term speculators with very high risk tolerance expecting financial sector declines within hours or days. Maximum recommended holding period is 1-3 days. Should represent less than 5% of portfolio and only for investors who can afford total loss.