What if I tell you when the index/market moves DOWN by 1%, your investments could potentially move UP by 3%.
Welcome to the world of Leveraged ETFs!!!
What is Leveraged ETFs?
Leveraged ETFs are financial products that give an investor amplified market exposure. The magnitude of the amplified market exposure varies from double leveraged to triple leveraged. As the name implies, double leveraged would give an investor double the market exposure. When the market increases by 1%, the double leveraged ETF increases by 2%. Similarly, triple leveraged would give an investor triple the market exposure.
Not all leveraged ETFs move in tandem with the market, i.e. when the market moves up, the leverage ETF moves up as well. Inverse ETFs move in the opposite direction of the intended market/index.
Similarly, there are inverse double leveraged ETFs and inverse triple leveraged ETFs.
The Mechanics of Leveraged ETFs
To achieve amplified market exposure,