What is a leveraged ETF?

A leveraged ETF is an exchange-traded fund that uses derivatives to buy a basket of securities, similar to how margin traders borrow money in order to get better returns. Just like margin trading, a leveraged ETF has the potential for greater returns as well as bigger losses. Is Investing in Leveraged ETFs a Good Idea?

What are leveraged 3x ETFs?

Leveraged 3X ETFs are funds that track a wide variety of asset classes, such as stocks, bonds and commodity futures, and apply leverage in order to gain three times the daily or monthly return of the respective underlying index. Such ETFs come in the long and short varieties.

What are the requirements for a leveraged ETF?

Levered mandate. Funds must have a leverage factor of at least 1.5X the daily returns of the underlying benchmark. Average daily volume of at least $15 million. Leveraged ETFs are intended for short-term, intraday trading, and positions are closed out at the end of each day; this means liquidity is of vital importance.