Direxion has launched a new tactical ETF enabling investors to enact a strongly bullish position on the investment theme of electric and autonomous vehicles.

Dave Mazza, Managing Director and Head of Product at Direxion.

The Direxion Daily Electric and Autonomous Vehicles Bull 2X Shares (EVAV US) has been listed on NYSE Arca with an expense ratio of 1.07%.

According to data from the International Energy Agency, there are already more than 10 million electric vehicles on the road today. The segment is also expanding rapidly with Bloomberg analysts predicting that figure to jump to 66 million over the next two decades.

The number of autonomous vehicles is also expected to grow sharply with a projected 33 million autonomous cars on the road by 2040.

Direxion believes, however, that these growth projections may actually be conservative as they were formed before Senators Joe Manchin (D-W.Va.) and Chuck Schumer (D-N.Y.) introduced a $369 billion climate and tax proposal in the Senate in late July 2022. The bill, named the Inflation Reduction Act, is expected to significantly affect the number of Americans driving next-generation automobiles by improving US energy production and storage, supply chain, and manufacturing capabilities.

Dave Mazza, Managing Director and Head of Product at Direxion, commented: “The path to long-term acceptance and widespread adoption of electric and autonomous vehicles is brighter than ever before. EVAV allows traders to take an amplified bullish position on electric and autonomous vehicles, along with the infrastructure to support them.”

Edward Egilinsky, Managing Director and Head of Sales and Alternatives at Direxion, added: “With the Senate passage of the Inflation Reduction Act, the market is looking at the electric and autonomous vehicle sector with fresh eyes given the prospect of long-term government support. These stocks can be volatile in nature, and thus EVAV may be utilized as a trading tool for those active traders looking to take advantage of short-term price swings.”

Methodology

The fund delivers twice (+200%) the daily performance of the Indxx US Electric and Autonomous Vehicles Index.

The index selects its constituents from a universe of US-listed stocks, including American Depository Receipts, with market capitalizations above $500 million and average daily trading volumes greater than $2 million.

The methodology utilizes FactSet’s Revere Business Industry Classification System (RBICS) to screen for companies classified within industries linked to three electric & autonomous vehicle sub-themes: Manufacturers (companies that manufacture and sell electric or autonomous vehicles), Enablers (companies that build infrastructure such as charging docks or create technologies such as specialized batteries), and Software Technology Providers (companies that develop software used in electric & autonomous vehicles).

The index includes the largest 25 pure-play companies, defined as those that generate at least 50% of their revenue from the above sub-themes.

Constituents are weighted by average daily trading volumes while capping the weight of any single stock at 8% and the cumulative weight of all stocks with weights above 4.5% at 45%.

As of 15 August, the index’s largest positions included Tesla (7.8%), NIO (7.8%), XPeng (7.0%), Lucid Group (6.7%), and Li Auto (6.7%).

Inverse and leveraged ETFs are typically suitable only for sophisticated traders who understand the risks involved, in particular how these products tend to decay in value if held for an extended period of time.