Leveraged/Inverse

May 05, 2021

This criterion tells you whether an ETP is leveraged or inverse.

  • Leveraged (ETF)
    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.
  • Inverse
    A type of Exchange Traded Product (ETP) that seeks to profit from a negative move in its stated benchmark index. Inverse ETPs generally 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, especially over investment periods lasting longer than one day. These ETPs use a variety of derivatives such as futures, options and SWAPs. These ETPs may give an investor single or multiple (leveraged [LMS1]) inverse exposure, such as double or triple inverse exposure. These ETPs are also known as “Short” or “Bear” ETPs.