The Xchange Blog

Cybersecurity. (Don’t) Get HAKK(D).


Ready to Trade?

If you’re bullish on cybersecurity, consider the Direxion Daily Cyber Security Index Bull 2x Shares (HAKK). This leveraged ETF seeks daily investment results, before fees and expenses, of 200% of the performance of the ISE Cyber Security™ Index.

If you’re a bear, consider the Direxion Daily Cyber Security Index Bear 2x Shares (HAKD). This leveraged inverse Cyber Security ETF seeks daily investment results, before fees and expenses, of 200% of the inverse performance of the ISE Cyber Security Index.


 

Feel like sombody’s watching you?

In just the first 90 days of this year:

  • U.S. military command operations in the Middle East were hacked via Twitter Inc. And YouTube.
  • American Airlines had ten thousand accounts within the airline’s domain breached.
  • Several banks and financial institutions reported information being taken after card owners stayed at Marriott International Inc. hotels across the country.
  • Tens of million Anthem Inc. customers had their information stolen in a massive data breach that is considered to be among the largest in corporate history.
  • A notoriously heinous net hacker known as CyberCaliphate hacked Newsweek’s Twitter and threatened the U.S. president.
  • U.S. State Dept. is breached by Russian hackers and subsequently shut down to remove malware.
  • The email account of one employee belonging to Sacred Heart Health System’s third-party healthcare billing vendor was hacked, compromising personal information of more than 14,000 patients.
  • An unnamed cyber mafia group hacked the tax returns of over 330,000 households

As evidenced by this small sample of high-profile data breaches, personal and corporate data is under siege. In fact, the World Economic Forum (WEF), cited cyber-attacks as one of the fastest growing and highest impact risks for the world economy. This reflects both the growing sophistication of cyber-attacks and the rise of hyper connectivity, with a growing number of physical objects connected to the Internet and more and more sensitive personal data – including about health and finances – being stored on cloud servers. In the United States alone, cybercrime already costs an estimated $100 billion each year. Gartner Inc., a technology research firm predicts information-security spending will rise 7.1% in 2015, to $77.2 billion, and will reach $106.1 billion by 2019.

2015 Global Risks Landscape 2015
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Source: World Economic Forum (WEF), Global Risks Perception Survey 2014.

The risk of cyber-attacks has surpassed terrorist attacks and asset bubbles on both dimensions of impact and likelihood in terms of global risks, according to the annual Global Risks Perception Survey, which is completed by almost 900 members of the WEF’s global multi-stakeholder community.

STVs: Socially Transmitted Viruses

Currently, there are over 1.5 billion social network users worldwide with more than 60% of users accessing social media services via smart phones. Social networking is one of the most popular ways for online users to spend their time, and a preferred way to stay in contact with friends and families. This is one of the top reasons why hackers target social media networks. Users are likely to click links they think are posted by friends, which hackers use to their advantage. For example:

  • Like-jacking: criminals post fake Facebook “like” buttons to web pages. Users who click the button don’t “like” the page, but instead download malware.
  • Link-jacking: redirecting a website’s links to malware infected websites that hide downloads or other types of infections.
  • Social phishing: the attempt to acquire sensitive information such as usernames, passwords, and credit card details (and sometimes, indirectly, money) by disguising itself as a trustworthy entity in a Facebook message or Tweet.

More than 600,000 Facebook accounts are compromised every single day. Why? Because social media users trust their friends. People are the weakest link when it comes to cyber security, which is why psychological manipulation of cyber-attack victims is so common.

Cyber hot or Cyber not?

Faster communication technology, closer trade and investment links, more physical mobility and access to information tie countries, economies and businesses more tightly together. In the coming years our lives will be more intensely shaped by these forces. For companies on the cutting edge of the cyber war, it’s good for business. The fear of hacking is causing explosive growth in cybersecurity stocks. Companies on the frontlines of the cyber war such as Fortinet Inc., Trend Micro Inc., and Science Applications International are all part of over 30 stocks tracked by the ISE Cyber Security Index that has enjoyed a good run so far this year. 

Still, this tech subsector is not a sure thing. Although high-profile data hacks have pushed shares of mostly smaller U.S. firms that protect against computer hacks to new highs, the same dynamic has raised concerns about valuations. Fueled by the increased spending from governments, companies concerned about data security, the cybersecurity boom is a reality.

But the past may be prologue. Other hot stock-market sector runs prove that it’s possible that those buying shares now could face huge losses while experiencing heavy volatility, even if the sector moves higher over the long run. Often, new hot sectors are overrun by short-term traders looking to make quick profits and exit after the first bad headline. That pattern has played out in biotechnology and social media.

Bold trades on Cybersecurity

If you’re bullish on cybersecurity, consider the Direxion Daily Cyber Security Index Bull 2x Shares (HAKK). This leveraged ETF seeks daily investment results, before fees and expenses, of 200% of the performance of the ISE Cyber Security Index.

If you’re a bear, consider the Direxion Daily Cyber Security Index Bear 2x Shares (HAKD). This leveraged inverse Cyber Security ETF seeks daily investment results, before fees and expenses, of 200% of the inverse performance of the ISE Cyber Security Index.