How does FAZ and FAS ETF work.

I have always been looking at FAZ and FAS and wondered how does it work. I tried to go Direxion Share website and tried to understand what all those terms mean to a new investor.

The defination of FAS and FAZ as given on Direxion Share website are as follows:
FAS: The Financial Bull 3X Shares seeks daily investment results, before fees and expenses, of 300% of the price performance of the Russell 1000® Financial Services Index ("Financial Index"). There is no guarantee the fund will meet its stated investment objective.

FAZ:The Financial Bear 3X Shares seeks daily investment results, before fees and expenses, of 300% of the inverse (or opposite) of the price performance of the Russell 1000® Financial Services Index ("Financial Index"). There is no guarantee the fund will meet its stated investment objective.

Did this helped me to understand the true nature of these ETF? Definately no but it did warn me that you cannot be invested in these for long term. These are short term play, meaning you buy in morning and sell in evening or next day but definately cannot hold for a month or a year. Infact it is never meant for holding purpose. It is a tool to play in this volatile market.

But how does it work. People who are running these ETF definately knows in and out of this kinds of trade. So where does this leave all of us. Nowhere.

But here's my chance to find how really it work.

Rafferty Asset Management, LLC (“Rafferty” or “Adviser”), the investment adviser to the Funds, uses a number of investment techniques in an effort to achieve the stated goal for each fund.

Rafferty creates net “long” positions for the Bull Funds and net “short” positions for the Bear Funds. (Rafferty may create short positions in the Bull Funds and long positions in the Bear Funds even though the net exposure in the Bull Funds will be long and the net exposure in the Bear Funds will be short.)

Funds are invested in indexed as well as non-indexed securities. To meet its objectives, each Fund invests in some combination of financial instruments so that it generates economic exposure consistent with the Fund’s investment objective.

Each Bull and Bear Fund invests significantly in swap agreements, forward contracts, reverse repurchase agreements, options, including futures contracts, options on futures contracts and financial instruments such as options on securities and stock indices options, and caps, floors and collars. Rafferty uses these types of investments to produce economically “leveraged” investment results. Leveraging allows Rafferty to generate a greater positive or negative return than what would be generated on the invested capital without leverage, thus changing small market movements into larger changes in the value of the investments of a Fund.

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