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Know the Basics of Leveraged ETFs

These are Exchange Traded Funds that seek to generate a multiple (such as 2X or -2X) of the performance of a reference security for a specified time period.
They are designed for investors who have a high conviction bullish or bearish view on how they expect the reference security to perform.
Leveraged ETFs are considered easier-to-use and lower cost than other methods of leverage, such as borrowing on margin or using options strategies. ETFs can be bought and sold at any time during market hours.
Tradr's ETFs employ derivatives, such as total return swaps to achieve returns.

QUICK POINTS

  • ETF wrapper
  • Exchange-traded
  • Intraday liquidity and transparency
  • Easy-to-use, low cost
  • Uses derivatives for exposure

What ETFs to Use When

Tradr is the first issuer to provide leveraged ETFs across three performance reset periods - daily, monthly and quarterly - so you can choose the one that best suits your investment time horizon.

DAILY

For a shorter holding period
TSLQ NVDS SARK TARK

MONTHLY

For medium-term investing
MQQQ

QUARTERLY

For longer-term investing
QQQP SPYQ
Download Product List

The 3 Levers of Leveraged ETFs

1

Security

What is the ETF’s

reference asset?
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The underlying asset for a leveraged ETF can be tied to one of three types of reference securities:
Index-tracking ETFs: For instance, the SPY ETF tracks the S&P 500 Index, and Tradr’s SPYQ ETF uses the SPY ETF as its reference asset.
Actively managed ETFs: Tradr ETFs was the first to launch this type of product with SARK, which offers -2X (-200%) short exposure to the performance of the ARK Innovation ETF (ARKK).
Stocks: Tradr ETFs pioneered single stock leveraged ETFs in the U.S., including NVDS and TSLQ, which provide short exposure to the common stocks of Nvidia and Tesla, respectively.
2

Exposure

Does it invest short or long

and at what leveraged

multiple?
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Long or Short: If you are positive or have a bullish short-term view on a security, you would want long exposure. If you are bearish, you may take short (also known as “inverse”) exposure to seek gains when the price of a security goes down.
Leverage multiplier: For instance, multipliers can be 2X (200%) on the long side.
3

Timing

How often does

the performance target

reset?
plus minus
Performance Reset Period: Each ETF “resets” its performance target regularly at a defined point in time.
Daily Reset ETF: For example, a 2X long daily product will attempt to double (200%) the price change from the close of the prior day’s trading session to the close of that day's trading. Keep in mind, the price can go down, in which case the ETF moves 2X in that direction.
Non-Daily Reset ETF: This type of ETF, which was introduced by Tradr ETFs, offers a specified amount of leverage for a period other than a single day, including a calendar month or calendar quarter.

Daily Reset Leveraged ETFs for Daily Trading

Background

The first leveraged ETF (LETF) was introduced in 2006. Since then, there have been over 200 LETFs launched representing over $100 billion in assets under management. Until Tradr launched the first monthly and quarterly LETFs in 2024, all of these ETFs had a daily performance reset.

Opportunities of “Dailies”

Dailies are well-designed for active traders, whether individuals or professionals managing portfolios, who can continually watch and move in and out of positions.
They can be an effective way to amplify returns on a very short-term basis, namely a day at a time.

QUICK POINTS

  • Introduced in 2006
  • $100B+ assets
  • Performance resets daily

3 Challenges of Holding Dailies Beyond a Day

1

Volatility Drag

plus minus
Every day the Daily ETF resets its performance target at a new level. High day-to-day price volatility of the reference security, especially up and down, affects your investment results.
This phenomenon is called “volatility drag” and is more pronounced the longer the ETF is held. Professor William Trainor from East Tennessee University analyzed 20,000 simulations based on an underlying index that rises between 8-12% over a year and found that, on average, a 2x daily leveraged fund returned just 3.1% and a 3x daily ETF returned -17.7%.
2

Compounding

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When a Daily is held for a while, it becomes increasingly difficult to account for the effects of compounding and to hit the targeted leverage multiple (e.g., 2X) over a longer holding period.
3

Rebalancing

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Dailies require frequent monitoring of your position and, if you want to use them as intended, would necessitate frequent trading, which potentially generates additional trading costs.
The bottom line is uncertainty. Volatility drag and the compounding effect create a “Leverage Trap” that complicates the investor’s ability to achieve the desired leverage, and literally can eat away at returns.

ENTER NON-DAILY RESETS

In 2024, Tradr evolved leveraged ETFs by launching the world’s first monthly and quarterly reset LETFs.

They offer an ETF alternative for investors who seek leveraged returns and intend to stay in their positions for more than a few days.
 
Now investors can better align their performance reset period with their investing time horizon.
 
Performance reset periods are available for calendar months and calendar quarters.
20250224 Gray Flip Calendar iStock-2128551534

What Makes Non-Daily Leveraged ETFs Different?

Investors have more control over the three levers of their leveraged trades.
The uncertainty due to daily price volatility and compounding can be reduced.
The burden of daily monitoring and frequent rebalancing is eased.
Investors can take a longer position to express their high conviction views.

QUICK POINTS

  • Control over
time horizon
  • Reduced
volatility drag
  • Less daily monitoring

Non-Daily Resets Explained on Nasdaq's Just for Funds

Risk factors

Tradr ETFs are for sophisticated investors and professional traders with high conviction views and are very different from most other exchange-traded funds. Know the risks before you invest. The significant risks of leveraged and/or inverse ETFs include the risks of leverage, derivatives, and/or other complex investment strategies that they employ. These investments are designed for short-term trading for investors seeking daily, monthly or quarterly leveraged investment results…

Exposure to a Variety of Securities

Leveraged exposure to leading ETFs.

SPY

Broad U.S.

stock market
SPYQ

Invesco QQQ®

Leading innovation stocks
MQQQ QQQP

ARKK

The ARK Innovation ETF
SARK TARK

Available for highly liquid mega cap stocks.

NVDA

Powerhouse in AI, crypto and gaming
NVDS

TSLA

Leader in electric vehicles and
autonomous driving
TSLQ
Download Product List

Nasdaq, Inc. is the owner of the registered trademark QQQ®, and Invesco QQQ® is used by Invesco under license from Nasdaq, Inc.

Frequently Asked Questions

How are reset periods defined?
Tradr's Leveraged ETFs provide a return based on the performance of the underlying reference security for one of the following specified reset periods:

 

  • Daily: Defined as the close of trading on the last business day to the close of trading on the next business day.
  • Monthly: A full calendar month is defined as the close of trading on the last business day of one calendar month to the close of trading on the last business day of the following calendar month.
  • Quarterly: A full calendar quarter is defined as the close of trading on the last business day of one calendar quarter to the close of trading on the last business day of the following calendar quarter.
How can I achieve the stated leverage of the ETF?
Let’s use a monthly reset period as an example. The only way to precisely seek the intended leverage is to buy the ETF at the market close on the last day of the previous month and sell it at the market close on the last day of the following month. Of course, you can hold the ETF for longer than a month, but remember that it will only seek to deliver the intended performance for one calendar month exactly, and then the performance period will be reset.
What happens to my performance if I don’t buy shares at the start of the reset period?
If you purchase shares at a time other than the close of the last business day of a calendar month or quarter, you will generally receive more, or less, than the intended leverage (such as 200% for a 2X long fund) exposure to the underlying reference security from that point until the end of the period.
What happens if I hold shares longer than the specified reset period?
Investors who invest for periods longer than the period specified by the fund (whether daily or for a full calendar month or quarter) should not expect to achieve the intended leverage (e.g., 200%) of the performance of the underlying security. The return will be the compounded return over the holding period, which will very likely differ from 200% of the return of the underlying security over that same time.

 

The impact of compounding can be more pronounced the longer the shareholder holds the ETF. Additionally, higher price volatility for the reference security will increase the impact of compounding on an investor’s returns. The Fund can lose money if the security’s performance is flat and, in some cases, even when the performance is positive.
How do the Tradr ETFs provide leveraged returns?
Tradr ETFs are actively managed funds that use derivatives, such as total return swaps, to seek the leveraged performance of the underlying security. They are rebalanced daily, monthly or quarterly, based on their stated reset period, to maintain their long or short exposure and to pursue its performance target. There can be no assurance that the Funds will achieve their objectives.
What happens if the reference security experiences a material loss during the reset period?
Tradr’s monthly and quarterly reset ETFs attempt to maintain the fund’s exposure to 200% of the monthly or quarterly return of the reference asset, respectively.

As a defensive measure, if abnormal market conditions or other circumstances cause a change in the value of the reference asset intra-period (i.e., other than at or near the close of the market of a calendar month or quarter) and the change exceeds a level determined to represent a “dramatic move” in the price of the reference asset (the “performance trigger”), we will seek to reset the performance leverage of the Fund by rebalancing the portfolio.

As an example, the performance trigger for SPYQ is -35%, which resets performance quarterly. If in the first quarter of the year, the price of SPDR® S&P 500® ETF Trust drops by 35% by February 14th, the Fund will rebalance its portfolio that day by resetting the swaps to the 200% leverage and delivering the performance through the end of that quarter. In essence, the stub period between the triggered reset date and the end of the period is treated like a brand new period, which would have the effect of reducing the leverage return for that calendar period. For more details, please refer to the prospectus.
When can I buy and sell shares of the ETFs?
A key advantage of all Exchange Traded Funds, including Tradr ETFs, is that you can purchase and sell ETF shares during the U.S. market trading session, similar to stocks. Keep in mind that you are not required to stay in your position for the specified reset period. For example, you may exit a quarterly leveraged ETF at any time, even if you did not hold it for a full calendar quarter.

Let’s Trade

If you use an online broker, you may be able to invest in Tradr ETFs through your account. Start by linking to your broker here.
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Important Risk Information

ETF shares are bought and sold at market price (not NAV) and are not individually redeemed from the ETF. There can be no guarantee that an active trading market for ETF shares will develop or be maintained, or that their listing will continue or remain unchanged. Buying or selling ETF shares on an exchange may require the payment of brokerage commissions and frequent trading may incur brokerage costs that detract significantly from investment returns.

There are risks involved with investing including the possible loss of principal. Diversification does not guarantee investment returns or eliminate the risk of loss. Past performance does not guarantee future results.

Investors should carefully consider the investment objectives, risks, charges and expenses of the fund before investing. To obtain a prospectus containing this and other important information, please click here to download a prospectus online. Read the fund’s prospectus carefully before you invest.

Distributed by ALPS Distributors, Inc, which is not affiliated with AXS Investments or its Tradr ETFs.

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