Leveraged ETFs: How to Maximize Short Term Returns

Leveraged ETFs: The What

There’s always more to know when it comes to investing. Leveraged ETFs are a relatively new financial tool that, while somewhat complex and high risk, can be extremely advantageous if used correctly.

A leveraged ETF is a fund that is designed to track a specific index while simultaneously multiplying its returns. Using a combination of derivatives and debt, leveraged ETFs attempt to maintain a constant multiplier, most commonly 2x or 3x the returns of the underlying index.

Investors most commonly use leveraged ETFs when there is an all but certain change in market conditions. Because they are a high risk and high cost investment vehicle, they are mostly used over short term spans with high certainty.

Leveraged ETFs exist for the entire investment spectrum, from 2x Bull S&P 500 ETFs to 3x Bear Natural Gas funds. Through these funds, one can speculate on bonds, commodities, currencies, real estate, stocks, and more. Today, I’ll highlight some funds to watch in each major category of leveraged ETFs.

I’ve broken the following ETFs into categories according to which type of assets they leverage. Each group contains notable funds that stand out in Total Assets, Year to Date return, or Average Volume. Click on the ticker symbol to trade on Wall Street Survivor, and click on the full name of each fund to see more data.

Leveraged Equity ETFs

  1. TQQQ– ProShares UltraPro QQQ:

This fund is the largest leveraged equity ETF by Total Assets with $4,091,080,000 invested. It is 3x leveraged and tracks the NASDAQ 100 Index.

  1. DUST– Direxion Daily Gold Miners Bear 3X Shares:

Up 82.54% this year, DUST profits when the NYSE Arca Gold Miners Index isn’t doing so hot. It’s called a “bear” fund because it acts in the inverse direction of the index it tracks.

  1. SQQQ– ProShares UltraPro Short QQQ:

The opposite of TQQQ, SQQQ is an inverse leverage of the NASDAQ 100. This fund gets a lot of action, with an Average Volume of 15,828,582 trades a day.

DUST: Yahoo FInance
DUST: Yahoo Finance

Leveraged Commodity ETFs

  1. UCO– ProShares Ultra Bloomberg Crude Oil:

UCO has the most Assets Under Management of any leveraged commodity ETF with $390,068,830. It is a 2x leveraged fund tracking the Dow Jones-UBS Crude Oil Sub-Index.

  1. DSLV– VelocityShares 3x Inverse Silver ETN:

It’s been a solid year for DSLV with an incredible YTD return of 63.01%. Although it’s expensive to bet against the S&P GSCI Silver Index, thus far in 2018 it’s been worth it.

  1. UWTI– VelocityShares 3x Long Crude ETN:

This hot commodity fund trades over 22 million times a day. It tracks the S&P 500 GSCI Crude Oil Index.

DSLV: Yahoo Finance
DSLV: Yahoo Finance

Leveraged Bond ETFs

  1. TBT– UltraShort Barclays 20+ Year Treasury:

Lots of money in debt. Nearly $1.7 billion in this fund. UltraShort and sweet.

  1. TTT– UltraPro Short 20+ Year Treasury:

As far as bonds go, a 16.26% YTD return is phenomenal. That’s what you get when you inverse leverage the Barclays Capital U.S. 20+ Year Treasury Index.

  1. TMV– Direxion Daily 20-Year Treasury Bear 3X– 2nd in YTD (14.99%) and Volume (587,883)

Another bear fund, TMV is up 15% this year and trades almost 600,000 times a day.

TTT: Yahoo Finance
TTT: Yahoo Finance

The above ETFs are by far the most common classes of leveraged funds. So check them out and figure out how each one could help you maximize your portfolio profits! If you’re interested in more unique funds, here are a few more to cut your teeth on!

Leveraged Currency ETFs

  1. EUO– ProShares UltraShort Euro: Highest Total Assets ($170,540,000)
  2. DAUD– VelocityShares Daily 4x Long USD vs AUD ETN: Highest YTD Return (24.59%)
  3. YCS– ProShares UltraShort Yen: Second highest in Avg. Volume and Total Assets

Leveraged Real Estate ETFs

  1. MORL– ETRACS Monthly Pay 2xLeveraged Mortgage REIT ETN: Highest Total Assets ($481,000,000)
  2. URE– ProShares Ultra Real Estate: Highest YTD Return (3.23%)
  3. DRN– Direxion Daily Real Estate Bull 3x Shares: Second in Avg. Volume and YTD Return