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Defiance ETFs launched a new leveraged fund on Thursday, designed to be used by investors seeking to increase their exposure to one of the largest tobacco firms in the world. The Defiance Daily Target 2X Long PM ETF (NASDAQ:ZYN) has been designed to provide twice the daily performance of Philip Morris International Inc. (NYSE:PM).
Launched side-by-side as another single-stock leveraged fund — the Defiance Daily Target 2X Long ANET ETF (NASDAQ:ANEL) — this ETF is structured to deliver 200% of Philip Morris’ daily performance, pre-expenses and fees. In order to do so, ZYN employs derivatives like swaps and options, providing what Defiance refers to as “exact, amplified exposure” without the need for a margin account.
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Philip Morris International, most famously known for cigarettes, has been positioning itself as a reduced-risk tobacco alternative player. Its flagship product, the IQOS device, a heat-not-burn device, is all part of an overarching strategy to transition adult smokers from cigarettes to smoke-free products. Through recent years, Philip Morris has seen constant expansion in its portfolio of reduced-risk products, a move that it claims signals its intention to “go beyond smoking.”
Defiance ETFs, a leader in leveraged and thematic strategies, has been growing its lineup of single-stock leveraged ETFs for retail traders looking for targeted bets on individual stocks. By targeting Philip Morris, ZYN gives investors the ability to bet on the company’s current tobacco exposure, as well as its move into alternative nicotine products.
But leveraged ETFs such as ZYN are day-trading vehicles. Their returns are driven by daily performance multipliers, so compounding consequences can cause long-term outcomes to deviate wildly from the underlying stock’s performance.
For investors who are comfortable taking on increased risk to achieve amplified returns, ZYN provides a novel means of speculating on the direction of a tobacco giant making a strategic transition into reduced-risk products.
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