Lecture 2: Advantages of Leveraged ETF

Leveraged ETF fully combine the advantages of ordinary spot trading, leveraged trading and contract trading, but at the same time are more robust in risk control. The specific advantages of leveraged etfs are as follows:

1. The operation is as simple as spot trading, with no borrowing and margin required, but higher yields

Leveraged ETF are with leverage, but operation process as convenient as spot trading. Users can buy leveraged ETF like regular spot, , both don't have to like leveraged trading to borrowing in advance, don't like contracts need to bear the risk of margin, forced liquidation risk. Investors can save energy and pursue higher returns at the same time. Take 3 times long BTC (BTC 3L) as an example, users only need to look at the price and net value -- input the purchase quantity -- choose to buy BTC 3L, without any other operation.

2、Effect of compound interest

Leverage trading and contract trading start with the principal and the principal doesn't change.  Leveraged ETF will automatically positions the proceeds into to the principal. If the user to buy leveraged ETF has produced gains (without prior gains of rebalancing),  when rebalancing next time, floating surplus will increase leveraged ETF positions, namely the new 3 times the gains positions, make profits form a compound model.

3、No explosion, robust risk control

Unlike contract trading, which involves taking the risk of exploding positions, leveraged ETF have built-in "rebalancing" risk controls that prevent them from exploding.

For example, if BTC falls by 33%, the 3 times BTC long contract will be liquidated undoubtfully, while the leveraged ETF product BTC3L, through rebalance mechanism, will not approach zero. There will be some asset left.

4、Low trading fees

Leveraged ETFs are held at lower trading fees than the interests on borrowed funds in leveraged trading.

Warning

Leveraged ETF is a tradable product that tracks three times the daily profit of underlying assets. Users shall pay attention to the gap between the actual net value of the product and the latest price when placing an order. If you put the order in the opposite direction, there is a risk that the price will approach zero in extreme conditions. This product subjects to the derivative with high risk. Please watch out the risk in investment.