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What are 3x exchange traded funds?

A:

Quick Answer

A 3x leveraged exchange traded fund seeks to outperform the index or commodity it tracks by three times. If the tracked index raises by 1 percent, a 3x leveraged ETF would aim to create a 3 percent return on investment.

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Full Answer

A leveraged ETF consists of not just the securities in the tracked index but also derivatives of securities and the index itself, such as options, swaps, forward contracts and futures. Leveraged ETFs are designed to produce a multiple return on a daily, rather than annual, basis. Leveraged ETFs are considered to be high-risk investments, as they can also produced multiple negative returns. Some examples of 3x leveraged ETFs include Direxion Daily Large Cap Bull 3X Shares, PowerShares DB 3X German Bund Futures ETN and Barclays Long B Leveraged S&P 500 Total Return ETN.

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