Leveraged exchange traded funds are a convenient way to invest into popular stock indexes, market segments, and even commodities, while getting extra volatility. There is a growing selection of 3 times long and 3 times short ETFs that will provide you with exactly that.
If you are searching for exact performance of Standard & Poors 500, you can’t go wrong with SPY. But what if you are strongly convinced about the upside and want to profit more from it? SPXL has your back. Designed to mimic three times the return of S&P 500, it is also one of the most liquid ETFs on the market. Feeling bearish? SPXS does the exact opposite, that is three times shorting the famous index.
Tech stocks included in Nasdaq are all the hype lately. Famous QQQ is tracking 100 of the largest ones. But there are also leveraged versions of it with a smooth liquidity. TQQQ for going 3x long and SQQQ for going 3x short. With this added volatility, you can play even smaller ups and downs.
What about small caps? If you need to trade smaller companies and basic IWM tracking Russell 2000 is too boring for you, try TNA for leverage exposure to small caps or TZA for shorting them (also with triple leverage). Daily volumes go into millions so you should have no problems with volatility.
Grandfather of all stock indexes also has it’s non-leveraged and leveraged exchange traded funds. Look for DIA for the basic performance of Dow Jones and if you want one on steroids, try 3x leveraged UDOW. For bears, SDOW replicates triple the inverse. Those are both great options, especially since Dow Jones is known to be a little sluggish most of the time.
But there is so much more you can trade with Leveraged ETFs besides american stock indexes. Big economies from around the globe are listed this way. Regardless if you want to get a piece of Australia or Russia. But once you get into completely different time zones, intraday movements can become small and bulk of the movement happens during those other countries’ trading hours (which are outside of regular trading for their US listed funds).
What about market segments? We love for example the option to trade biotech companies from S&P. Regular ETF is to be found under ticker XBI and (surprisingly for some) has an average daily volume of almost 7 millions! And of course there are leveraged and inverse leveraged spin-offs. Look for LABU for long position and LABD for inverse position.
When it comes to precious metals, best game is waiting for you with silver. Not only it is more volatile than gold, but even the leveraged funds have immense liquidity. SLV is the non-leveraged one or you can spice things up with USLV and DSLV. Gold is still golden and you can duplicate its price movements with GLD. There are also UGLD and DGLD to leverage your position in long and short direction respectively but be advised that with only tens of thousands of shares traded daily, the chart movements look more cubist than spiky. Still, you should get some price action on every important price level.
For lovers of more exotic investments, PALL can give your portfolio the taste of palladium. There are no leveraged versions of it though. And coffee junkies might be delighted to hear that JO is tracking the movements of this delightful drink.
Real estate is deemed to be another safe haven during turbulent times (unless it is 2008 and the crisis is triggered by toxic mortgages). You can benefit from real estate trusts by purchasing VNQ or some other competing ETF. The leveraged versions are DRN for 3x long and DRV for 3x short.
Probably most popular commodity is crude oil. And of course you can find appropriate ETF to duplicate the movements of this black liquid gold. USO does the job and for leveraging it’s movements three times, you can use UWT and DWT, Natural gas traders can invest in UNG and 3x long is delivered by UGAZ while DGAZ will provide you with exposure to 3x the inverse movements.
Warning: While listed leveraged ETFs usually copy exactly what you would expect – movements of the underlying asset times 3 or times -3, this is true only short-term. Most of them are backed using future contracts to provide these multiples. And those contracts are expiring eventually. What does it mean long-term? Oblivion. Just look at the chart few years back. You will see that some funds lost 90% or more in couple years. That chart is probably adjusted for reverse splits. That’s why that ETF’s price isn’t in pennies yet. So keep this in mind, and if you plan buying into leveraged ETF, enter the position for couple days, weeks at maximum. Because other things being equal, value of your shares will be declining in time.