Leveraged Currency

Leveraged currency mutual funds and ETFs are designed to offer magnified exposure... Leveraged currency mutual funds and ETFs are designed to offer magnified exposure to movements in currency values. Leveraged funds exist for a range of currencies---including the U.S. Dollar and other developed market currencies. These funds aim to achieve a fixed multiple of daily returns compared to their reference currency. The leverage factor can range from 1.5% to 3x. For example, if the Yen rises 1% on a given day vs. the Dollar, a 1.5% bull ETF linked to the Yen should rise 1.5%. On the other hand, if the Yen falls 1%, this same fund should decline by 1.5%. To achieve their objectives, leveraged currency 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, leveraged currency mutual funds and ETFs are attractive for short-term traders with a large appetite for risk. Last Updated: 01/24/2025 View more View less

Leveraged currency mutual funds and ETFs are designed to offer magnified exposure to movements in currency values. Leveraged funds exist for a range of currencies---including the U.S. Dollar and other developed market currencies.... Leveraged currency mutual funds and ETFs are designed to offer magnified exposure to movements in currency values. Leveraged funds exist for a range of currencies---including the U.S. Dollar and other developed market currencies. These funds aim to achieve a fixed multiple of daily returns compared to their reference currency. The leverage factor can range from 1.5% to 3x. For example, if the Yen rises 1% on a given day vs. the Dollar, a 1.5% bull ETF linked to the Yen should rise 1.5%. On the other hand, if the Yen falls 1%, this same fund should decline by 1.5%. To achieve their objectives, leveraged currency 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, leveraged currency mutual funds and ETFs are attractive for short-term traders with a large appetite for risk. Last Updated: 01/24/2025 View more View less