Leveraged ETF Definition
Learn the definition of leveraged etf and other ETF terminology from the etf.com glossary.
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Leveraged ETFs are specialized investment instruments designed to magnify returns by using financial derivatives and debt. These funds aim to deliver daily returns that are a multiple (2x or 3x) of the performance of an underlying index. Leveraged ETFs provide a way for investors to amplify their market exposure without directly engaging in margin trading. While offering the potential for enhanced profits, their compounding effects and daily reset mechanisms make them complex and better suited for short-term trading, as prolonged holding can result in a significant deviation from the expected multiple due to compounding and volatility.
