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DB Gold Double Long ETN (DGP)

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Last Post: 5/3/2016 10:53:19 PM - Followers: 12 - Board type: Free - Posts Today: 0

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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 trade on the NYSE Arca and are:

DB Gold Double Long ETN (DGP)
DB Gold Double Short ETN (DZZ)#board-12683
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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#58   americano thank you, Pope Francis : Why The NYBob 05/03/16 10:53:19 PM
#57   28 May 2016 Dollar if they knew americano 05/02/16 05:26:41 PM
#56   americano thank you; The Evidence That The Dollar NYBob 05/02/16 04:54:57 PM
#55   High Bob they fed better come locked and americano 05/01/16 06:20:03 PM
#54   americano my friend - FYI. Beware: Gold Will NYBob 05/01/16 04:21:39 PM
#53   Made my 10 grand,time to sell. FAILURE TO DELIVER 04/26/13 10:37:50 AM
#52   Gold kicking ass and taking names....I love $$$$$$$$$$$$$$. FAILURE TO DELIVER 04/25/13 11:16:36 PM
#51   another 500 at 32.60 FAILURE TO DELIVER 04/15/13 03:15:31 PM
#50   Long 1000 shares at 33.00. FAILURE TO DELIVER 04/15/13 11:21:11 AM
#49   https://www.facebook.com/photo.php?fbid=350140595074129&set=a.350140581740797.85 fade 09/27/12 04:06:47 PM
#48   Gold's multi-year march forward stopped when it went Scandle34 08/05/12 04:55:16 PM
#47   Gartman back on the buy bandwagon after a Sunnybank 01/05/12 01:59:29 PM
#46   Thanks, realfast. I had 'em DVR'd and Sunnybank 11/03/11 08:15:31 AM
#45   CNBC: Gartman is watching the strength in gold realfast95 11/02/11 03:01:39 PM
#44   Was out of the house... guessing it's why Sunnybank 11/02/11 01:41:49 PM
#43   We didnt get qe3 today, but well see untamed72 11/02/11 01:20:13 PM
#42   QE3 will happen and when it does G silvergun 09/24/11 07:27:27 AM
#41   economy unraveling, gold and silver rising. untamed72 08/19/11 11:10:20 AM
#40   Unravelling in an upwards ,rising, kind of way. peel+green 08/17/11 08:10:28 AM
#39   Should be an interesting fall. Things are unraveling quickly. untamed72 08/06/11 07:53:44 PM
#38   Just can't quite get through this resistence. maybe_this_time 03/07/11 02:36:48 PM
#37   Looks like gold wants to test that upper resistance... maybe_this_time 03/01/11 10:33:41 AM
#36   Took a position here this morning. Stop maybe_this_time 02/22/11 10:24:05 AM
#35   DGP has just been great this year. conix 11/04/10 02:57:54 PM
#34   Looks like DGP is at resistance today to FinancialAdvisor 04/15/09 11:11:45 AM
#33   FWIW, I'm looking to get in on DB frenchee 04/07/09 09:13:43 PM
#32   My MAC-D settings are the fast settings recommended frenchee 04/05/09 01:47:54 PM
#31   The MACD you use is a bit different FinancialAdvisor 04/05/09 03:36:47 AM
#30   Test of the 100-day MA on tap. frenchee 04/04/09 04:20:48 PM
#29   We'll be bearish for the time-being, they've seemed FinancialAdvisor 03/18/09 11:51:47 AM
#28   Where have all the gold bugs gone? frenchee 03/17/09 03:47:00 PM
#27   Weekly charts suggest down whereas daily suggest up...I'm frenchee 03/12/09 06:12:09 PM
#26   Will Gold Move On? Hulbert thinks the frenchee 03/10/09 07:08:30 PM
#25   US Gov going in deep debit to short americano 03/02/09 05:18:40 PM
#24   Grim Economy Creates a Golden Opportunity frenchee 02/17/09 07:41:11 PM
#23   Are ETNs in Trouble? frenchee 01/28/09 04:33:41 PM
#22   Sorry but I don't recall. Probably yes! frenchee 01/24/09 09:50:47 AM
#21   Was this the P&F chart that was aiming FinancialAdvisor 01/23/09 08:56:57 PM
#20   Sweet DGP breakout today. Looks like next frenchee 01/23/09 07:50:52 PM
#19   StockCharts doesn't have that ability that I'm aware frenchee 01/16/09 09:02:51 AM
#18   This is starting to look intriguing giving the FinancialAdvisor 01/15/09 05:01:10 PM
#17   10-4. The ETF's reaction to the up trend line frenchee 01/15/09 02:14:50 PM
#16   Hi frenchee, FinancialAdvisor 01/15/09 02:13:06 PM
#15   It will really get going after the down-trend frenchee 12/29/08 07:07:41 AM
#14   Can you tell me how they figure the bobbytx1 11/09/08 08:52:15 PM
#13   I have to agree with you bobbytx1 11/09/08 08:51:14 PM
#12   DGP looks like she is ready to run! stock2windaily 11/04/08 08:35:18 AM
#11   obi- Looks identical to GLD which looks identical RBKissMyAs 10/29/08 02:05:24 PM
#10   As dollar gets weaker - gold is going stock2windaily 10/28/08 09:00:56 AM
#9   I'm going to start averaging into this ASAP True Blue 10/13/08 09:35:01 PM
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