What is a leveraged ETF product
A leveraged ETF is a fund product whose underlying base is based on the price of a basic digital currency (such as BTC), and realizes a fixed multiple (such as 3 times or -3 times) of the underlying asset return rate from the time of the last position adjustment. For example, if the BTC price rises by 1%, the net value of the corresponding 3x leveraged bullish ETF product (BTC3L) will rise by 3%, while the net value of the corresponding 3x leveraged bearish ETF product will fall by 3%. Since the latest transaction price of the product may deviate from the net unit value, we will also list the net unit value and the latest transaction price to avoid losses for investors.
The advantages of leveraged ETFs and applicable scenarios and market conditions
If the leveraged ETF is compared with the ordinary triple-leveraged futures contract: If the leveraged ETF and the ordinary triple-leveraged futures contract are purchased on the first day, the underlying price trend will rise by 10% for 3 consecutive days, ignoring the cost, the net return of the leveraged ETF is respectively 0.3, 0.69, 1.197, while the ordinary three times leveraged futures contract yields are 0.3, 0.63, 0.993. Similarly, for a market where the underlying price has fallen 10% for 3 consecutive days: the yield of leveraged ETFs is -0.3, -0.51, -0.657; and for ordinary triple-leveraged futures contracts, the yield of this situation is -0.3, -0.57 , -0.699. For the volatile market, suppose the daily trend of the target is +10%, -10%, +10%, -10%... for ten consecutive days (five days +10%, five days -10%): The yields of leveraged ETFs and ordinary triple-leveraged futures contracts are approximately equal to -37.6% and -14.7%, respectively. It can be seen that, regardless of the rise or fall of the unilateral market, the performance of leveraged ETFs is better than that of futures with the same leverage. Because with the continuous rise (or fall) of the target, the position also rises (or falls), amplifying (or reducing) the compound interest effect brought by the rise (or fall). However, in the volatile market, leveraged ETFs amplify the wear and tear of assets, so their return performance is worse than that of futures contracts with the same leverage.
It can be seen from the above examples that the unilateral market returns of leveraged ETFs are better than those of the same leveraged futures contracts; and for long-term volatile markets, due to the magnification of wear and tear, there is even a risk that the equity price will tend to zero.