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Leveraged ETFs
Overview
Short and leveraged (S&L) ETFs are derivatives and debt-based instruments used to express non-vanilla convictions on individual or baskets of securities. Leveraged ETFs allow investors to amplify the returns of a particular exposure, from a one-to-one basis to a double or even triple returns basis. On the other hand, inverse or short ETFs offer a contrarian exposure of one, two or three times on a security’s returns. The product class as a whole is complex, with varying reset times meaning the returns do not move exactly in tandem with their underlying over longer durations.