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.

Does a 3x leveraged ETF guarantee a higher return?

Leveraged ETFs do not guarantee a higher return on their underlying index or asset, even though that is the goal. If the underlying index returns 15% in a day, the 3x leveraged ETF aims to provide returns of 45%, and vice versa—so a 15% loss in a day for the index should translate into a 45% loss for the ETF.

What is a 3x ETF?

The difference is that 3x ETFs apply even greater leverage to try to gain three times the daily or monthly return of their respective underlying indexes. The idea behind 3x ETFs is to take advantage of quick day-to-day movements in financial markets. In the long term, new risks arise.

Is Direxion a 3x leveraged ETF?

But the 3x leveraged ETF, Direxion Daily S&P 500 Bull 3x ETF ( SPXL ), declined in price by -25.13% which is more than five times the decline as SPY, which tightly tracks the S&P 500 index. Important: A leveraged ETF seeks to generate a daily return that is a multiple of a specified index's return.