The low price of FAZ and FAS, approximately $5 and $8 respectively, has caused a surge of volume in the funds in recent months as investors require more shares to meet intraday hedging objectives. The pending reverse split of the shares should lower transaction fees for frequent investors while discouraging investors who should avoid the funds in the first place.

FAS and FAZ were launched by Direxion in November of 2008, as measures of volatility reached incredible peaks. As investors were looking for even greater means to bet on the market's intraday moves, Direxion introduced the two triple-leveraged funds, which provide 3 times exposure for shareholders on a daily basis. Because the funds have a daily "reset" in their tracking of the market, risk that a long-term loss will result grows over time.

In one of my recent articles, "Big Action in Triple-Leveraged ETFs," I discussed how math can work against long-term holders of leveraged ETFs. Because the funds only track returns on a daily basis, a percentage move down that follows a percentage move up can be detrimental. Case in point: FAS, the 3 times bull ETF, is down more than 67% year-to-date while its bearish peer FAZ is down nearly 86%. Clearly, these ETFs do not track the movement of the actual market over time.

Direxion Shares and Direxion Funds, managed by Rafferty Asset Management is the issuer of leveraged index funds, ETFs and alternative-class fund products for investment advisors and sophisticated investors who seek to effectively manage risk and return in both bull and bear markets. Founded in 1997, the company has approximately $6.5 billion in assets under management as of May 31, 2009. Disclosure available on the company's Web site further specifies that the products are intended for advanced investors only.

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