Leveraged Commodity

Leveraged commodity mutual funds and ETFs are designed to offer magnified exposure... Leveraged commodity mutual funds and ETFs are designed to offer magnified exposure to movements in commodity futures prices. These funds aim to achieve a fixed multiple of daily returns compared to their reference commodity future. The leverage factor can range from 1.5% to 3x. For example, if gold futures rise 1% on a given day, a 1.5% bull ETF linked to gold futures should rise 1.5%. On the other hand, if gold futures fall 1%, this same fund should decline by 1.5%. To achieve their objectives, leveraged commodity mutual funds and ETFs enter into derivative contracts with banks and other financial institutions. It's important to note that these funds are only meant for very-short term trading. Because they are rebalanced daily depending on market fluctuations, leveraged funds may not produce the same result if held for weeks, months or longer. In fact, it’s quite possible that a leveraged fund may fall in value over a longer period, even if the underlying market rises. As a result, these are attractive for short-term traders with a large appetite for risk. Last Updated: 11/26/2024 View more View less

Leveraged commodity mutual funds and ETFs are designed to offer magnified exposure to movements in commodity futures prices. These funds aim to achieve a fixed multiple of daily returns compared to their reference... Leveraged commodity mutual funds and ETFs are designed to offer magnified exposure to movements in commodity futures prices. These funds aim to achieve a fixed multiple of daily returns compared to their reference commodity future. The leverage factor can range from 1.5% to 3x. For example, if gold futures rise 1% on a given day, a 1.5% bull ETF linked to gold futures should rise 1.5%. On the other hand, if gold futures fall 1%, this same fund should decline by 1.5%. To achieve their objectives, leveraged commodity mutual funds and ETFs enter into derivative contracts with banks and other financial institutions. It's important to note that these funds are only meant for very-short term trading. Because they are rebalanced daily depending on market fluctuations, leveraged funds may not produce the same result if held for weeks, months or longer. In fact, it’s quite possible that a leveraged fund may fall in value over a longer period, even if the underlying market rises. As a result, these are attractive for short-term traders with a large appetite for risk. Last Updated: 11/26/2024 View more View less