US product lets investors triple bet on popular tech stocks

If the target stocks gain 10 per cent, the notes should trade up 30 per cent

Reuters January 23, 2018
Commuters pass by the NASDAQ Marketsite in New York, May 21, 2012. PHOTO: REUTERS

Investors are getting a high-octane way to bet on or against the stock market’s technology leaders.

A new product aims to let investors triple the return of 10 stocks, including the so-called FANG stocks – Facebook, Amazon, Netflix and Google parent Alphabet.

The BMO REX MicroSectors FANG+ Index 3X Leveraged Exchange Traded Note starts trading on Tuesday under the ticker FNGU, the product’s backers said in a note on Monday.

If the target stocks gain 10 per cent, the notes should trade up 30 per cent.

London was top destination for tech funding in 2017

A companion product, BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged Exchange Traded Notes, which will trade under the ticker FNGD, aims to let investors triple the inverse of the same index.

If FANG and the other stocks fall by 10 per cent, the notes would gain 30 per cent.

FANG stocks have profited tremendously during the US bull market since the 2007-2009 global financial crisis, and for some investors they have come to symbolize the market’s excesses.

Netflix, the best performer of the four, has gained more than 5,000 per cent since the end of 2008.

Apple, Alibaba, Baidu, Nvidia, Tesla and Twitter round out the other holdings in the index.

Where Netflix goes, Big Tech may follow

A unit of Intercontinental Exchange developed the index and the notes are also being listed on its NYSE Arca exchange. They did not immediately respond for comment. The note’s issuer, Bank of Montreal also did not respond to a request for comment.

ETNs, like debt, constitute a pledge by an issuer. Payouts are based on the performance of the underlying index, but the notes do not actually own those stocks, unlike most of the ETFs to which they are often compared. The stocks are equally weighted regardless of market capitalization.


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