There are many types of ETFs out there. They range from financial ETFs to high-yield ETFs, and then there are 3X ETFs. 3X ETFs are the triple-leveraged ETFs. These ETFs are designed to amplify the returns of the benchmark indices by three times by using financial derivatives and debt. Thus, compared to traditional ETFs that track the underlying index on a 1:1 basis, triple leveraged ETFs aim to follow the benchmark index on a 3:1 basis.
3X ETFs are, therefore, more suitable for short-term trading purposes rather than long-term investment opportunities. They are more expensive than traditional ETFs due to the use of leverage and the need for constant trading to maintain their positions.
|GUSH||Direxion Daily S&P Oil & Gas Exploration & Production Bull 3x Shares||$108.71||-33.25%|
|JDST||Direxion Daily Junior Gold Miners Index Bear 3X Shares||$6.50||-11.92%|
|SOXS||Direxion Daily Semiconductor Bear 3x Shares||$18.20||-48.00%|
|ERX||Direxion Daily Energy Bull 3X Shares||$51.63||-8.41%|
|BRZU||Direxion Daily Brazil Bull 3X Shares||$55.74||-50.92%|
|LABD||Direxion Daily S&P Biotech Bear 3x Shares||$22.49||-33.46%|
|TECS||Direxion Daily Technology Bear 3X Shares||$23.83||-25.62%|
|SQQQ||ProShares UltraPro Short QQQ||$32.34||-6.50%|
|DUST||Direxion Daily Gold Miners Bear 3X Shares||$11.33||-4.63%|
|JNUG||Direxion Daily Junior Gold Miners Index Bull 3x Shares||$38.73||-52.16%|
|SRTY||ProShares UltraPro Short Russell2000||$53.99||13.42%|
|TZA||Direxion Daily Small Cap Bear 3X Shares||$34.86||13.92%|
|FAZ||Direxion Daily Financial Bear 3X Shares||$24.54||38.57%|
|DFEN||Direxion Daily Aerospace & Defense Bull 3X Shares||$18.97||-20.23%|
|SPXU||ProShares UltraPro Short S&P 500||$14.92||10.52%|
|SPXS||Direxion Daily S&P 500 Bear 3X Shares||$19.61||9.98%|
|RUSL||Direxion Daily Russia Bull 3x Shares||$6.55||#N/A|
|EDZ||Direxion Daily Emerging Markets Bear 3X Shares||$13.20||25.12%|
|SDOW||ProShares UltraPro Short Dow30||$28.87||2.19%|
|NUGT||Direxion Daily Gold Miners Bull 3X Shares||$39.90||-44.42%|
|DRN||Direxion Daily Real Estate Bull 3x Shares||$8.23||-63.60%|
|YANG||Direxion Daily China 3x Bear Shares||$10.16||-34.83%|
|TMV||Direxion Daily 20-Year Treasury Bear 3X||$106.05||41.40%|
|TTT||UltraPro Short 20+ Year Treasury||$60.24||42.01%|
|DRIP||Direxion Daily S&P Oil & Gas Exploration & Production Bear 3x Shares||$16.63||-33.48%|
|FAS||Direxion Daily Financial Bull 3X Shares||$51.85||-57.75%|
|INDL||Direxion Daily India Bull 3x Shares||$38.13||-30.27%|
|NAIL||Direxion Daily Homebuilders & Supplies Bull 3X Shares||$40.73||-14.13%|
|EURL||Direxion Daily FTSE Europe Bull 3x Shares||$18.86||-29.68%|
|UDOW||ProShares UltraPro Dow30||$50.70||-30.40%|
|MIDU||Direxion Daily Mid Cap Bull 3X Shares||$32.66||-42.82%|
|ERY||Direxion Daily Energy Bear 3X Shares||$34.69||-34.05%|
|YINN||Direxion Daily China 3x Bull Shares||$44.70||-54.76%|
|TNA||Direxion Daily Small Cap Bull 3X Shares||$28.84||-54.77%|
|URTY||ProShares UltraPro Russell2000||$33.97||-55.41%|
|USLV||VelocityShares 3x Long Silver ETN||$53.08||0.93%|
|CURE||Direxion Daily Healthcare Bull 3x Shares||$91.37||-27.94%|
|EDC||Direxion Daily Emerging Markets Bull 3X Shares||$29.57||-47.10%|
|SPXL||Direxion Daily S&P 500 Bull 3X Shares||$66.31||-44.28%|
|UPRO||ProShares UltraPro S&P 500||$34.97||-44.65%|
|TMF||Direxion Daily 20-Year Treasury Bull 3X||$9.02||-52.05%|
|TECL||Direxion Daily Technology Bull 3X Shares||$33.73||-44.47%|
|SOXL||Direxion Daily Semiconductor Bull 3x Shares||$16.57||-60.63%|
|LABU||Direxion Daily S&P Biotech Bull 3x Shares||$4.57||-72.78%|
|TQQQ||ProShares UltraPro QQQ||$25.82||-54.72%|
|FNGU||MicroSectors FANG+™ Index 3X Inverse Leveraged ETN||$92.11||-60.97%|
What is a 3X ETF?
3X ETFs, also known as leveraged exchange-traded funds, are a type of investment vehicle that aims to deliver triple the daily performance of their underlying indexes. These funds use financial derivatives such as options, futures, and swaps to amplify their returns. While 3X ETFs offer the potential for higher gains than their non-leveraged counterparts, they also come with increased risk, making it crucial for investors to thoroughly understand them before investing.
3X ETFs are popular among traders who are looking to make quick profits in the market. However, due to the high level of risk involved, it is important to approach these investments with caution. It is also important to note that these funds are not suitable for all investors, and it is essential to consult with a financial advisor before making any investment decisions.
One of the benefits of 3X ETFs is that they can help traders to magnify their gains in a short period of time. For example, if an underlying index increases by 1%, a 3X ETF would aim to increase by 3%. This can be a significant advantage for traders who are looking to capitalize on short-term market trends.
However, it is important to note that 3X ETFs can also magnify losses in the same way. If an underlying index decreases by 1%, a 3X ETF would aim to decrease by 3%. This means that traders who invest in 3X ETFs need to be prepared to accept a higher level of risk and volatility in their portfolios.
Another thing to consider when investing in 3X ETFs is the expense ratio. These funds tend to have higher expense ratios than their non-leveraged counterparts, which can eat into profits over time. It is important to carefully consider the expense ratio before investing in a 3X ETF.
In conclusion, 3X ETFs can be a powerful tool for traders looking to capitalize on short-term market trends. However, due to the high level of risk involved, it is important to approach these investments with caution and to thoroughly understand the potential risks and rewards before investing.
How Does a 3X ETF Work?
A 3X ETF, also known as a triple-leveraged ETF, is a type of exchange-traded fund that seeks to provide three times the daily return of its underlying index. While this may sound like an attractive investment opportunity, it’s important to understand how these ETFs work before investing.
As mentioned, a 3X ETF achieves its leveraged exposure by utilizing various financial derivatives such as options, futures, and swaps. These instruments allow the ETF to amplify the daily performance of the underlying index, resulting in a return (or loss) that is three times greater than the index’s daily movements.
However, it’s important to note that this leverage is reset on a daily basis. This means that if you hold a 3X ETF for an extended period, the returns you receive may differ significantly from what you might expect based on the underlying index’s performance.
Another factor to consider when investing in a 3X ETF is the increased risk. Because of the leverage involved, these ETFs can be much more volatile than traditional ETFs. This means that while you may see higher returns in a bull market, you may also experience larger losses in a bear market.
It’s also worth noting that 3X ETFs are not suitable for all investors. In fact, many financial professionals advise against using leveraged ETFs as a long-term investment strategy. Instead, they may be more appropriate for short-term trading or hedging strategies.
In summary, a 3X ETF can provide investors with the opportunity to amplify their returns, but it’s important to understand the risks involved and to use them appropriately within a well-diversified portfolio.
What to Look for in a 3X ETF
When evaluating 3X ETFs for potential investment, it’s crucial to consider a few key factors, as all 3X ETFs are not created equal. These factors include:
- Expense Ratio: Leveraged ETFs typically have higher expense ratios than their non-leveraged counterparts, so you’ll want to search for one with a reasonable fee structure.
- Tracking Error: You should analyze how closely a 3X ETF tracks its underlying index to ensure that its performance aligns with your expectations.
- Trading Volume: To minimize liquidity risks and make it easier to enter or exit positions, you’ll want to focus on 3X ETFs with a high average daily trading volume.
- Counterparty Risk: Since 3X ETFs use financial derivatives for leverage, there may be counterparty risk involved. Be sure to examine the ETF’s underlying holdings and counterparties to understand these risks better.
Exploring the Different Types of 3X ETFs
3X ETFs come in various flavors, giving investors multiple options to choose from. Some common types of 3X ETFs include:
- Equity: These ETFs seek to provide triple the daily return of a specific stock index, such as the S&P 500 or Nasdaq Composite.
- Fixed Income: 3X fixed income ETFs offer investors a leveraged exposure to bond indices such as the U.S. Treasury Bonds.
- Commodity: These funds offer leveraged exposure to commodity markets such as gold and crude oil, aiming to provide three times the daily performance of their respective commodity indexes.
- Volatility: 3X volatility ETFs provide amplified exposure to an index tracking expected market volatility or the widely-followed CBOE Volatility Index (VIX).
How to Evaluate 3X ETFs for Risk and Reward
While 3X ETFs offer the potential for impressive gains, their increased risks must be considered. Before investing in these funds, evaluate their risk and reward profile by analyzing factors such as their historical performance, average daily trading volume, and holdings in financial derivatives.
Furthermore, ensure that a 3X ETF aligns with your overall investment strategy and risk tolerance. Since these funds are designed for short-term trading, long-term investors might find other alternatives more suitable for their portfolios.
Popular 3X ETFs
While we won’t provide specific investment advice, we can highlight some popular 3X ETFs for your consideration. Be sure to do your research and consult a financial professional before investing:
- ProShares UltraPro QQQ (TQQQ): This ETF aims to deliver three times the daily return of the Nasdaq-100 Index.
- ProShares UltraPro S&P 500 (UPRO): This fund seeks to provide triple the daily return of the S&P 500 Index.
- MicroSectors FANG+ Index 3X Leveraged ETN (FNGU): This exchange-traded note (ETN) offers three times the daily return of the NYSE FANG+ Index, which includes popular technology stocks.
How to Trade 3X ETFs
Trading 3X ETFs is similar to trading regular ETFs. You can buy and sell them through your brokerage account on stock exchanges. However, it’s important to remember that these funds are best suited for short-term trading, as the leveraged risk profile can increase significantly over time.
When trading 3X ETFs, consider implementing stop-loss orders and other risk management strategies to protect your investment from substantial losses. And always keep a close eye on the market and your positions, as 3X ETFs can be significantly affected by market swings.
The Pros and Cons of Investing in 3X ETFs
Before you add any 3X ETFs to your portfolio, it’s important to weigh the pros and cons. Here are a few to consider:
- Potential for significant short-term gains
- Wide range of sectors and indices for exposure
- Easy to trade through standard brokerage accounts
- Increased risk due to leverage
- Possible tracking errors
- High expense ratios
- Not suitable for long-term investing
In conclusion, 3X ETFs offer investors the opportunity to secure potentially impressive short-term gains. However, these types of funds come with increased risks and expenses. If you decide to invest in 3X ETFs, be sure to thoroughly research each fund’s performance, risk profile, and fees, and consult with a financial professional to ensure they align with your overall investment strategy.
Which 3X ETFs Should I Buy?
A wide variety of 3X ETFs trade on the US stock exchanges. We have aggregated a list of the top 3X ETFs, with at least $25 million in assets under management, for investors to make their selection from.
Investors can decide which 3X ETFs to buy based on the underlying index they track, leverage used, rates of return promised, and whether they will make money when the index rises or declines in value. Triple-leveraged ETFs are excellent avenues of investment for magnifying returns; however, they are highly volatile and risky.