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DB Gold Double Short ETN (DZZ)

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Deutsche Bank (DB) has leapfrogged ProShares in the race to launch leveraged and inverse commodity products in the United States. The company launched three exchange-traded notes linked to the Deutsche Bank Liquid Commodity Index - Optimum Yield Gold. The new ETNs will trade on the NYSE Arca and are:

DB Gold Double Long ETN (DGP)#board-12649
DB Gold Double Short ETN (DZZ)
DB Gold Short ETN (DGZ)

The notes are designed to provide +200%, -200% and -100% of the monthly return of the underlying index, respectively. Importantly, that index is tied to the value of an investment in gold futures, not gold bullion; the two prices do not always track perfectly. Moreover, like all commodity futures products, the notes incorporate the income futures investors would gain from investing their collateral cash in Treasuries. That will add approximately 5% of positive return to each index ... including the short and double short indexes.

Note that the Treasuries return will not be leveraged in the double up or double down funds; only the return of the futures contract will be leveraged.

The fact that the notes are tied to the monthly return of the index is noteworthy. That differs from the way the popular ProShares and Rydex leveraged ETFs work, as those funds are linked to the daily return of their benchmarks. That sounds like a nominal difference, but it is not: Because of the impact of compounding, doubling the monthly return as opposed to the daily return should allow these notes (in most circumstances) to stick closer to the long-term price trends of the underlying index.

An example will explain why. Suppose you have an index starts at 100, rises 20% on day one to 120 and then drops 10% on day two to 108 (10%*120=12). The fund that doubles the daily return would rise to 140 on day one and then drop to 112 on day 2 (10%*140=28). After two days, the fund that doubled the daily return would be up 12%, while the index is up 8%.

If instead you had a fund that doubled the two-day return, it would be up 16%. The longer the interval for each measurement, the closer (in most circumstances) you'll be to doubling the long-term return of an index.

That difference could be important. ProShares has filed papers with the Securities and Exchange Commission to launch leveraged, inverse and inverse-leveraged ETFs tied to various commodities and commodity indexes, including products linked directly to gold bullion; however, it has not received approval to launch these products yet in the U.S. Deutsche Bank appears to have been able to leapfrog ProShares by using the ETN structure, which has a more streamlined approval process than ETFs.

These are the first ETNs launched directly by Deutsche Bank, although it offers a family of commodity exchange-traded funds in partnership with PowerShares. In fact, the impetus for this launch is tied directly to the existing PowerShares funds. Last year, PowerShares and DB tried to convince shareholders in the PowerShares DB Gold ETF (DGL) to switch its mandate from tracking the basic index to doubling its return. That fund had gathered just $55 million in assets, overshadowed by the $19 billion streetTRACK Gold Fund (GLD); investors appear to like the simplicity of direct bullion exposure rather than the futures+interest exposure granted by DGL.

PowerShares and DB thought that doubling the return might attract more investors and help differentiate the fund, but they were unable to gather the necessary votes for a proxy battle, and ultimately they gave up on the idea.

Clearly, Deutsche Bank was working on another approach.

The new notes charge 0.75% in expenses.


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#109   $DZZ recent news/filings stocktrademan 03/27/16 02:33:38 PM
#108   One would think but I can think of stocktalkpa 02/03/15 12:23:00 AM
#107   Time to play here? phishtrick 02/02/15 10:57:38 PM
#106   Gold is finally broken. Yea...should have never been wallst-winest 04/15/13 03:16:28 PM
#105   Has the gold bubble finally sprung a leak afxm 02/20/13 08:39:50 PM
#104   DZZ 5 minute chart. Gosh, I remember when Stock 01/25/13 02:49:51 PM
#103   Great profits here! Crusader 12/20/12 11:54:11 AM
#102   Famous last words....top's in Crusader 10/07/12 03:40:56 AM
#101   Its money. Is money "done"? Not exactly. True Blue 08/01/12 05:38:01 AM
#100   Yes it's done! chloebware 08/01/12 05:35:56 AM
#99   No True Blue 08/01/12 05:35:02 AM
#98   Gold is done! chloebware 08/01/12 05:17:48 AM
#97   Going up, daily chart below... pigsGETslaughtered21 03/13/12 09:39:04 PM
#96   DZZ is a great looking stock to go Locotrader 12/05/11 01:53:55 PM
#95   Long DZZ at 4.31 earlier today Stock 11/07/11 03:42:32 PM
#94   DZZ, fighting it way back,any more gas in moneyfarmer1 09/29/11 11:02:39 AM
#93   DZZ to the MOON!!!!!!!!!!!!!!!!!!!! moneyfarmer1 09/28/11 02:30:00 PM
#92   BLAST OFF!!!!!!!!!!!!!!!!!!!!!!!! moneyfarmer1 09/28/11 02:07:03 PM
#91   WOWSEEE!!! another power move HERE!!!!!!!!! moneyfarmer1 09/28/11 02:06:16 PM
#90   NO, I'M IN!!!! again at 5.13 moneyfarmer1 09/28/11 01:03:46 PM
#89   I'M OUT!, I'M OUT!!!!!! at 5.45, made a moneyfarmer1 09/26/11 10:52:52 AM
#88   down with the KING!!!!! inhiding 09/22/11 04:46:57 PM
#87   looks like another power MOVE!!!!! moneyfarmer1 09/22/11 11:33:08 AM
#86   well alrighty, good day here!!!!!!! moneyfarmer1 09/22/11 10:22:58 AM
#85   DZZ,climbing back moneyfarmer1 09/20/11 11:31:11 AM
#84   rising wedge, higher lows moneyfarmer1 09/20/11 11:30:22 AM
#83   low of day in, heading higher moneyfarmer1 09/20/11 11:29:27 AM
#82   DZZ , should break ,next few days moneyfarmer1 09/20/11 10:56:27 AM
#81   DZZ, trading sideways, will it break up or moneyfarmer1 09/20/11 10:54:05 AM
#80   I want gold to crash, and crash hard!!! inhiding 09/15/11 10:50:53 PM
#79   DZZ heading higher after a break from yesterday moneyfarmer1 09/15/11 10:41:10 AM
#78   chart still looks good moneyfarmer1 09/13/11 11:23:15 AM
#77   Ez gold goes down this goes up gold wealthmoney 09/12/11 08:02:33 PM
#76   O.K., 7%, next stop, weeee!!!!! moneyfarmer1 09/12/11 02:32:40 PM
#75   $$ tomorrow$$ moneyfarmer1 09/12/11 02:30:19 PM
#74   hang on to your hats, getting a little moneyfarmer1 09/12/11 02:28:48 PM
#73   really!!, the chart is looking great moneyfarmer1 09/12/11 02:20:18 PM
#72   don't miss the train!!!!!!! moneyfarmer1 09/12/11 02:18:37 PM
#71   6% closing in here!!!!!!! moneyfarmer1 09/12/11 02:17:51 PM
#70   DING!!!!!!!!!!! 5% up moneyfarmer1 09/12/11 01:29:07 PM
#69   up 4 % currently, can DZZ keep climbing???????? moneyfarmer1 09/12/11 12:30:21 PM
#68   looks like a POWER MOVE coming on!!!!!! moneyfarmer1 09/12/11 12:15:20 PM
#67   if the Qchart quote is correct this printed Scandle34 09/06/11 07:49:58 AM
#66   what a concept. I vote yes. Scandle34 08/31/11 09:52:03 PM
#65   counting on Bernacke for my entry to be met... Scandle34 08/31/11 09:50:46 PM
#64   See you in september wealthmoney 08/27/11 10:30:03 PM
#63   – Now, if you’re wondering why the gold wealthmoney 08/25/11 03:50:30 PM
#62   gold down 15 now wealthmoney 08/25/11 11:22:58 AM
#61   And GLD is flying right back up, lol Stock 08/25/11 10:29:34 AM
#60   GLD is now 168. DZZ 5.03. Sell DZZ Stock 08/25/11 08:12:51 AM
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