Lecture 1: What is Leveraged ETF?

Definition of Leveraged ETF

A leveraged exchange-traded fund (ETF) is a product that uses financial derivatives and debt to amplify the returns of an underlying token. For example, if the underlying token rises 1%, the corresponding 3x leveraged ETF rises 3% respectively, while the -3x products falls 3% respectively. 

A leveraged ETF is essentially a fund managed by a professional financial team. Each ETF product corresponds to a certain number of futures contract positions. The fund manager can dynamically adjust the futures positions so that the entire fund share can maintain a fixed leverage for a certain period of time. A professional team is responsible for the management and maintenance of the investment portfolio, allowing investors to easily build their own constant leveraged investment portfolio without needing to understand the specific mechanism.

How leveraged etfs work

When the underlying token (BTC) along the swings in the opposite direction than a threshold value, the fund management will introduce the mechanism of rebalancing, recalibrate fund positions to ensure that net fund losses do not exceed a certain limit. In this way, the price will not completely return to zero, so there is no risk of burst.  

The operation process of leveraged ETF

Leveraged ETF are sustainable products, which will not  expire. Investors can buy or sell on the secondary market at any time, and do not need to pay any deposit to achieve the purpose of trading leveraged.

Disclaimer

Leveraged ETF is an emerging financial product. The content above does not constitute investment advice. Please watch out investment risks.

Leveraged ETF reduces the risks of liquidation, but in extreme conditions there’s possibility that the price will approach zero and be liquidated. Please pay attention to the difference between order price and net value, to avoid losses.