Leveraged (ETF)

May 05, 2021

A type of Exchange Traded Product (ETP) that seeks to amplify the potential returns and/or potential losses of a benchmark index. Leveraged ETPs seek results over a pre-set time period indicated in the prospectus or offering circular. That time period is often one day. As a result, their returns can differ significantly, both positively and negatively, from that of their benchmark index, especially over investment periods lasting longer than one day. These ETPs use a variety of derivatives such as futures, options and SWAPs. They aim to keep a constant amount of leverage during the investment time frame, (often one day)such as a 2:1 or 3:1 ratio. Leveraged ETPs can either amplify returns and losses on the long side of the market or the inverse side of the market.