Are there 4x leveraged ETF?
BMO has launched the first quadruple leveraged ETN fund that tracks the S&P 500. The fund will trade under the ticker symbol "XXXX" and seeks to generate four time the S&P 500's return on a daily basis. The launch come as bullishness rise among investors and Wall Street predicts more gains to come in 2024.
The Leverage Shares 5x Long US Tech 100 ETP Securities is designed to provide 5x the daily return of Invesco QQQ Trust (QQQ) stock, adjusted to reflect the fees and costs of maintaining a leveraged position in the stock.
ProShares UltraPro QQQ is the most popular and liquid ETF in the leveraged space, with AUM of $21.9 billion and an average daily volume of 67.3 million shares a day.
The 4x ETNs are leveraged notes, which means they are exposed to the risk of four times any decrease in the level of the Index, compounded daily.
There's now a juiced-up way to get 4 times the return of the S&P 500 — but it comes with many risks. Bank of Montreal launched the Max SPX 500 4x leveraged ETNs, which tracks four times the total return of the S&P 500. The notes will begin trading under the ticker “XXXX” on Tuesday.
Leverage is specified as a ratio, for example, 1:2 (2x), 1:5 (5x), and even 1:10 (10x). It shows how many times the trader's position increases. For example, using a leverage of 5x allows you to control a position that is five times larger than your initial investment.
By doing so you paid ₹2 lakh from your own pocket but were able to trade 1,000 shares worth ₹10 lakh (5x). Without leverage in the stock market, your total profit would have been only ₹100 x 200 = ₹20,000. Hence, through a leveraged trade, you not only gained 5x exposure but also made 5x profit.
The 10X S&P 500 ETF tracks the S&P 500® Index. The S&P 500® Index was created in 1957 as the first U.S. Market-Cap-weighted index, and tracks 500 of the top companies in the U.S. economy.
A leveraged ETF uses derivative contracts to magnify the daily gains of an index or benchmark. These funds can offer high returns, but they also come with high risk and expenses. Funds that offer 3x leverage are particularly risky because they require higher leverage to achieve their returns. Yahoo Finance.
The Direxion Daily Junior Gold Miners Index Bull 3x Shares (JNUG) and the Direxion Daily Junior Gold Miners Index Bear 3x Shares (JDST) are the two most volatile exchange-traded funds of all. Each has a one-year volatility reading of about 170.
What is 500x leverage?
Leverage Ratio: In your example, a 500x leverage ratio means that if you have $1, you can control a position worth $500. This magnifies both potential profits and potential losses.
With x10 leverage you could execute the same trade, but your $1,000 would act as what is known as a Margin, and you'd effectively be trading with $10,000. Now the 10% gain would translate into a $1,000 profit (10,000*0.10). However, the 10% loss would result in you losing your entire trading capital - 100% loss.
MAX S&P 500 4X Leveraged ETN is an ETN domiciled in the USA. The Fund tracks the S&P 500 Total Return Index on a daily compounded 4x leveraged basis less any fees. U.S.
According to our calculations, a $1000 investment made in February 2014 would be worth $5,971.20, or a gain of 497.12%, as of February 5, 2024, and this return excludes dividends but includes price increases. Compare this to the S&P 500's rally of 178.17% and gold's return of 55.50% over the same time frame.
In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500, then you would be sitting on a cool $1.2 million today.
| Symbol | ETF Name | 10y Chg 4-2-24 |
|---|---|---|
| XNTK | SPDR NYSE Technology ETF | 457% |
| QTEC | FT Nasdaq 100-Technology Sector ETF | 452% |
| QQQ | Invesco Nasdaq 100 Trust ETF | 452% |
| IGV | iShares Expanded Tech-Software Sector ETF | 425% |
Traders with $10,000 in capital can consider using moderate leverage, such as 1:50 or 1:100. The choice of leverage should align with the trader's risk tolerance and trading strategy.
1:1000 Leverage
A leverage ratio of 1:1000 provides the highest level of amplification, allowing you to control positions that are 1000 times larger than your capital. This level of leverage carries significant risks and is generally not recommended for beginners.
500:1 leverage means you can initiate a position valued at 500 times your capital. That could be profitable, or it could wipe out your capital if the price moves 0.2% against you. Leverage varies around the world, with some countries only allowing up to 30:1. There's no reason to use that much leverage.
Kraken Futures allows trading with up to 50x leverage.
What is the liquidation price for 5x leverage?
For example, with 5x leverage, your position hits the liquidation zone if the price moves 20% against you. So if you're riding a 5x bull on the price going up, a 20% drop would trigger the liquidation alarm bells.
What is the best leverage level for a beginner? If you are a novice trader and are just starting to trade on the exchange, try using a low leverage first (1:10 or 1:20). After you've gained some experience in Forex trading, you can gradually increase it. While doing so, always remember about the risk management system.
| Symbol | Name | 5-Year Return |
|---|---|---|
| FNGO | MicroSectors FANG+ Index 2X Leveraged ETNs | 45.21% |
| TECL | Direxion Daily Technology Bull 3X Shares | 36.48% |
| SMH | VanEck Semiconductor ETF | 32.29% |
| ROM | ProShares Ultra Technology | 30.58% |
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification. But the number of ETFs is not what you should be looking at.
Generally speaking, fewer than 10 ETFs are likely enough to diversify your portfolio, but this will vary depending on your financial goals, ranging from retirement savings to income generation.
