It was a wild week for banking stocks:
Bank of America
(NYSE:BAC)became the biggest stress-test loser, pressed to raise $33.9 billion in capital, but the stock rose every single day last week.
(NASDAQ:FITB)and Genworth Financial (NYSE:GNW)were the market's biggest gainers, up 121% and 116% respectively last week.
Did you know that the sector can be even wilder? Investors have been buying into sector-specific mutual funds for decades, and that has evolved into leveraged exchange-traded funds (ETFs, for short) that introduce greater levels of volatility into a vehicle that was designed to be less risky by providing easy access to a basket of stocks.
In the financial-services playground, a few of the ETFs on steroids are Direxion Daily Financial Bull 3x Shares
The Direxion funds attempt to replicate a move that is 300% the move of the financial services stocks within the Russell 1000. How well did they do? Well, it's not a perfect science. The Russell 1000 Financial Services Index soared 19.6% higher last week. Under that scenario, the bullish Direxion ETF should have soared 58.8%, with the bearish vehicle shedding a similar amount. Well, Direxion Financial Bull climbed 60.5% as Direxion Financial Bear surrendered 47.9% of its value.
Several factors behind the daily gyrations -- and naturally investors who bid up and down the shares based on sentiment -- factor into the discrepancies. However, it's clear that these are highly speculative vehicles that are feast or famine, even in a short span of time.
The two ProShares are tame by comparison. They only strive to create double the movement within the Dow Jones U.S. Financials Index. Pro Shares Ultra posted a 38.6% gain last week, with its evil twin UltraShort losing 33.3% of its value.
Investors naturally need to be careful here. These are high-risk vehicles for speculators. However, as long as the banking stocks have their insane gyrations, expect these ETFs to become even more popular cocktail party fodder.
Consider yourself both illuminated and forewarned.
Some other links to bank on:
Longtime Fool contributor Rick Munarriz invests has no problem being the banker in Monopoly, but he does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.