ETFs | Exchange Traded Funds

Understanding Leveraged ETFs

In essence, leveraged ETFs respond to gains by becoming more aggressive while they respond to losses by becoming more defensive.  In markets which are directional this can be an advantage; in markets which lack direction, this can be a disadvantage.  Read the following pdf to see examples of how a 3x leveraged ETF performs in various market scenarios.

Daily Investment Results 2015

The return of a leveraged ETF for a period longer than a day is the product of the series of leveraged daily returns for the fund within the period. It is not the return of the benchmark multiplied by the fund's target leverage point (3 in the case of Direxion Shares). The funds' returns can be positively impacted by a smoothly trending index, or negatively by a volatile index for a period longer than one day. Leveraged funds such as Direxion Shares, with relatively high leverage points, should be monitored regularly to ensure that desired exposure levels are maintained. If exposure levels grow beyond or drop below the levels sought by the investor, reallocation should be strongly considered.

Daily Targets in Volatile Markets

Intra-day, the total exposure of a 3x leveraged fund may be higher or lower than the stated daily objective depending on the movement of the target index away from its value at the end of the prior trading day.  Read the next pdf to see demonstrations of how the exposure changes based on the fluctuations in the value of the benchmark index.

Volatility Matters

Direxion's leveraged ETFs seek daily goals, which means that the returns of the ETFs over time should not be expected to be a multiple of the cumulative return off the benchmark for the longer period. This piece illustrates how different volatility levels of a fund's benchmark index can impact the returns of leveraged ETFs for periods greater than a day


Direxion Funds is a leading provider of leveraged index and other alternative class mutual fund products for investment advisors and sophisticated investors who seek to effectively manage risk and return in both bull and bear markets.


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