Your Guide to 3x Leveraged ETFs

Investment Options for Your Portfolio

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While leveraged exchange-traded funds (ETFs) can be seen as controversial investments, they also may come with high returns. These 3x leveraged ETFs allow you to earn up to three times the regular return, but they also allow you to lose up to three times the regular loss. Take the time to understand leveraged ETFs, more so if you're a beginner, as they might not be a good fit for your trading strategy.

  • 3x leveraged ETFs look to generate three times the returns of the underlying index.
  • This also means 3x leveraged ETFs also will generate losses that are three times that of the index.
  • It's also key to know that the return is expected on the daily return, not the annual return.
  • 3x leveraged ETFs are often not considered wise long-term investments.

What to Know About 3x Leveraged ETFs

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 month, the 3x leveraged ETF aims to provide returns of 45%, and vice versa—so a 15% loss in a month for the index should translate into a 45% loss for the ETF.

It's also key to know that the return is expected on the daily return, not the annual return. Thus, it may not be wise to think of 3x leveraged ETFs as long-term investments.

Other Leveraged ETFs

While we'll look at 3x leveraged ETFs below, there are also other types of leveraged ETFs, such as 2x leveraged ETFs. These serve the same investing purpose but could offer up to two times higher returns (or two times the losses). In the long run, leveraged ETFs are not meant for every investor's portfolio, so think over all of your options prior to investing your money.

List of 3x Leveraged ETFs

There are several 3x leveraged ETFs for investors to think about for their portfolio. Keep in mind that 3x leveraged ETFs can change their investment objective, such as dropping to a 2x leveraged ETF from a 3x leveraged ETF. They may also close and liquidate when there is an inability to attract enough investment assets.

It's also important to understand when an ETF is a leveraged ETF and when it is an inverse leveraged ETF. The latter means that the ETF will earn returns when the underlying index that it tracks goes down.

Here are several 3x leveraged ETFs to consider:

  • CURE: Direxion Daily Healthcare Bull 3X Shares ETF
  • DFEN: Direxion Daily Aerospace & Defense Bull 3X Shares ETF
  • DPST: Direxion Daily Regional Banks Bull 3X Shares ETF
  • DRN: Direxion Daily Real Estate Bull 3X Shares ETF
  • DUSL: Direxion Daily Industrials Bull 3X Shares ETF
  • DZK: Direxion Daily Developed Markets Bull 3X Shares ETF
  • EDC: Direxion Daily Emerging Markets Bull 3X Shares ETF
  • EURL: Direxion Daily FTSE Europe Bull 3x Shares ETF
  • FAS: Direxion Daily Financial Bull 3X Shares ETF
  • INDL: Direxion Daily MSCI India Bull 3X Shares ETF
  • JPNL: Direxion Daily MSCI Japan Bull 3X Shares ETF
  • KORU: Direxion Daily MSCI South Korea Bull 3X Shares ETF
  • LABU: Direxion Daily S&P Biotech Bull and Bear 3X Shares ETF
  • LBJ: Direxion Daily Latin America Bull 3X Shares ETF
  • MEXX: Direxion Daily MSCI Mexico Bull 3X Shares ETF
  • MIDU: Direxion Daily Mid Cap Bull 3X Shares ETF
  • NAIL: Direxion Daily Homebuilders & Supplies Bull 3X Shares ETF
  • PILL: Direxion Daily Pharmaceutical & Medical Bull 3X Shares ETF
  • RETL: Direxion Daily Retail Bull 3X Shares ETF
  • SOXL: Direxion Daily Semiconductor Bull and Bear 3X Shares ETF
  • SPXL: Direxion Daily S&P 500 Bull and Bear 3X Shares ETF
  • TECL: Direxion Daily Technology Bull and Bear 3X Shares ETF
  • TMF: Direxion Daily 20+ Year Treasury Bull and Bear 3X Shares ETF
  • TNA: Direxion Daily Small Cap Bull and Bear 3X Shares ETF
  • TPOR: Direxion Daily Transportation Bull 3X Shares ETF
  • TQQQ: ProShares UltraPro QQQ ETF
  • TYD: Direxion Daily 7-10 Year Treasury Bull and Bear 3X Shares ETF
  • UBOT: Direxion Robotics, Artificial Intelligence & Automation Index Bull 3X Shares ETF
  • UDOW: ProShares UltraPro Dow30 ETF
  • UMDD: ProShares UltraPro MidCap400 ETF
  • UPRO: ProShares Ultra Pro S&P500 ETF
  • URTY: ProShares UltraPro Russell2000 ETF
  • UTSL: Direxion Daily Utilities Bull 3X Shares ETF
  • YINN: Direxion Daily FTSE China 3X Bull and Bear 3X Shares ETF

Frequently Asked Questions (FAQs)

How does a 3x leveraged ETF work?

While a standard ETF holds a basket of stocks, the bulk of a leveraged ETF's holdings are usually derivatives like swaps and futures. These financial products add risk and leverage, compared to holding common shares of the stock. They are riskier bets than simply holding the stocks outright, but that's what allows a leveraged ETF to amplify volatility.

How do you trade 3x leveraged ETFs?

Accessing leveraged ETFs is the same as accessing any other ETF. You just need to search your brokerage for the ETF you want, and if it is available, then you place a trade order for that ticker symbol. In terms of the trading strategy for leveraged ETFs, it's important to remember that they typically lack the volume and liquidity of the index they track, and they aren't designed for long-term holding.

What is decay with 3x leveraged ETFs?

One common criticism of leveraged ETFs is that they experience "decay." This term refers to how leveraged ETF performance may deviate from standard ETFs that track the same index. Leveraged ETFs need to rebalance their holdings daily to maintain the proper levels of leverage. This process adds trading and management fees, and it can significantly change the price action.

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