A blowout earnings report for Nvidia is the latest development in a big year for chipmaker’s shareholders, and it has been an even bigger year for traders who use a red-hot leveraged ETF. Nvidia smashed estimates for the second quarter , and its third-quarter guidance called for sales of roughly $16 billion — up 170% year over year. The chip giant’s stock closed up just 0.1% on the day after briefly reaching an all-time high and is up more than 200% year to date. The GraniteShares 1.5x Long NVDA Daily ETF (NVDL) opened the day up more than 10%, living up to its leveraged label, but ended the day close to flat as Nvidia’s stock fell in the final hour of trading. NVDL 1D mountain The GraniteShares NVDL ETF has soared this year as the excitement around artificial intelligence has boosted Nvidia’s stock. The fund isn’t guaranteed to hit the 1.5-times mark every day, as Thursday’s session shows, but it has been a big success this year. NVDL had $260 million in assets under management before Thursday, with a return of more than 400% year to date. NVDL, like other single-stock funds, is reset on a daily basis using derivatives products known as swaps. That means that the fund is designed to deliver the promised 1.5-times return on a one-day basis, but that performance is likely to stray if investors hold the fund for a long time. Will Rhind, founder and CEO at GraniteShares, said that the orders for the swaps are due by 2:30 p.m. ET every day, so that the fund can capture the after-hours moves caused by events such as earnings. “It’s done so that the exposures of the fund captures the move on a daily basis, regardless of what is happening,” Rhind said. Single-stock ETFs were first approved by the Securities and Exchange Commission last year and have had mixed success so far, with several funds having already closed. Funds that focus on Tesla have been the most popular so far, along with NVDL. “It’s going to be extremely correlated with the enthusiasm factor that people have for the stock itself. … 2023 undoubtedly has been the year of Nvidia so far,” Rhind said. GraniteShares launched four more funds in the single-stock category this week, including the 1.5x Short NVDA Daily ETF (NVD) and the 1.5x Short TSLA Daily ETF (TSDD). Single-stock funds also tend to have higher expense ratios than broader funds that are not leveraged. NVDL has an expense ratio of 1.15%. While single-stock funds are new in the U.S., there are other leveraged products on the market that have longer track records and exposure to Nvidia; for example, the Direxion Daily Semiconductor Bull 3x Shares (SOXL) , which fell more than 9% on Thursday as other chip stocks struggled.
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