Trading term
What is Leveraged ETF?
A leveraged ETF uses borrowed money and swaps to give you a multiple, usually 2x or 3x, of an index's move each day.
The key word is each day. The fund resets its leverage at every close, so it promises 3x today's move, not 3x the move over a month or a year. Over longer periods your return depends on the path the index took.
In a steady climb, daily 3x can beat three times the index. In a choppy market it loses a little on every swing, which traders call volatility decay. The harder the index swings, the bigger that loss.
For example
SOXL aims for 3x the daily move of US chip stocks. From the end of 2025 to 30 October 2026, the 1x chip fund SOXX rose 56.8%. Three times that is 170.4%, but SOXL rose 83.4%.
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A leveraged ETF can fall far more than three times its index over a bad stretch. SOXL fell 90.5% from December 2021 to October 2022 while SOXX fell 45.8%.
⚠ Expecting 3x the index over a year
The 3x applies to each day only. A year when the index ends up can still be a losing year for the fund, as SOXL showed in 2024: SOXX rose 12.9% and SOXL lost 12.3%.