Single-stock Nvidia and Tesla ETFs are gaining traction, and they may be coming Down Under

Single-stock ETFs are trending, and can be traded with 0 costs on Webull

Nvidia and Tesla ETFs gain traction in the US. Image: Getty.

• Single-stock ETFs may be coming to Australia in the future

• These ETFs offer trading in popular US names such as Nvidia and Tesla

• Webull offers easy trading to these new ETF products

 

Special Report: Single-stock ETFs are trending, with Webull offering access to these investments.

In Australia, investors typically view Exchange-Traded Funds (ETFs) as a tool to passively track market indices or to gain exposure to specific themes.

Many hold onto these investments with the expectation of steady growth over time.

But the fast-growing local ETF market is poised for its next transformative phase as investors increasingly seek risk, and chase volatility in US markets.

"In the US, ETFs are often used with a more active strategy, including frequent trading and leveraging market fluctuations for short-term gains,” said Webull Securities Australia CEO, Rob Talevski.

And while most people here associate ETFs with a portfolio full of different stocks, the single-stock ETF market in the US has been creating waves of excitement recently.

As the name suggests, single-stock ETFs invest literally in just one stock.

Talevski says there is growing appetite for this product in Australia, particularly among younger investors who moved out of crypto when FTX collapsed.

“Now many of them are trading these current themes like AI, Nvidia, and Tesla, and trading the price volatility there, so thereʼs definitely a market,” Talevski said.

Talevski, who spent 20 years at CBA and its broker CommSec, says there are now ongoing conversations in the market that could bring these US products to the ASX.

According to him, bringing these US ETFs to Australia would allow retail traders to easily take short or leveraged positions without the hassle of arranging margin loans or finding a broker to lend stock, but we first need to get the green light from financial regulator the Australian Securities and Investments Commission (ASIC).

“I think their view is often that retail clients need to be protected from themselves, which I don’t think is fair,” Talevski said.

“Many are very informed but have regulatory limitations placed on them, which is why so many of them go offshore.”

How single-stock ETFs work

The market for single-stock ETFs has grown rapidly in the US, fuelled by the strong bull market in tech stocks and the lure of substantial potential gains.

These ETFs mostly target high-volatility stocks such as Tesla and Nvidia, but also other big tech names such as Apple, Microsoft, Amazon, Alphabet, and Meta Platforms.

Smaller or relatively unknown mid-sized companies are not yet represented in this space.

Some fundies are also venturing into single-stock ETFs for meme stocks such as AMC Entertainment and GameStop, aiming to capitalise on the excitement surrounding these speculative names.

On the Webull platform, the two most traded single-stock ETFs are leverage offerings targeting Nvidia and Tesla.

Here’s one leveraged Nvidia ETF offered on Webull – the GraniteShares 2x Long NVDA Daily ETF (NASDAQ:NVDL).

Source: Webull

A leveraged single-stock ETF like NVDL essentially uses margins to amplify returns.

A 2x leveraged ETF, for example, aims to deliver twice the daily return of the stock; so if Nvidia's stock rises by 1%, the ETF would rise by 2%.

These leveraged funds are attracting the most interest, with investors thinking: why accept a 200% gain on Nvidia, for instance, when a single-stock ETF could deliver 400% or more?

Another popular type of single-stock ETF is the inverse or short fund.

The short fund allows investors to profit from a stock's decline by essentially short-selling it.

For example, when Tesla drops, the ETF's value goes up. Some of these short funds also use leverage to amp up the returns.

Here’s the short, leveraged Tesla ETF offered on Webull – the GraniteShares 2x Short TSLA Daily ETF (NASDAQ:TSDD).

Source: Webull

Both the leveraged and short ETFs can also be traded on an index instead of just a single stock.

For example, a fund that aims to triple the returns of the NYSE semiconductor index (ticker ICESEMI) is the third most traded ETF in the entire US market.

Keep in mind that these ETFs carry higher risks compared to directly owning stocks or tracking an index, as they amplify both potential gains and losses.

Investors must properly manage funds like 2x and 3x leveraged ETFs to avoid excessive losses.

Leveraged ETFs also reset their exposure daily, which means their performance can diverge from the long-term performance of the underlying stock or index, especially in volatile markets.

Zero-commission ETF trading

Unlike other platforms, Webull seems to offer several compelling features for ETF traders.

First, it has zero-commission trading for both Australian and US ETFs.

And, in Stockhead’s experience using it, the platform is intuitive and easy to navigate, streamlining the process of executing trades.

We found that one of the most useful features on the app is the Order Flow data.

Order-flow distribution data is key in trading as it reveals how buy and sell orders are spread across prices, helping traders gauge liquidity and potential price movements.

The Webull platform also allows you to see short interest data in a particular stock.

This is important as high short interest can suggest bearish sentiment.

Days to Cover meanwhile helps gauge the potential difficulty and time required to exit short positions given current trading volume.

The Webull platform also boasts an extensive selection of ETFs, giving users access to a broad spectrum of options from well-known choices to more specialised themes.

Also, Webull equips traders with advanced tools such as real-time data, interactive charts, and technical analysis indicators.

In addition, the platform also offers educational content to help traders better understand ETFs and refine their trading strategies.

Webull can be downloaded from the Apple or Google Play stores for any device. It is completely free to install and set up an account.

This article was developed in collaboration with Webull, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.