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>Question: How can traders take advantage of leveraged ETFs without a huge capital commitment? Answer: Cut out the middleman and do as the indexers do, trade options on the ETFs.
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Question: How can traders take advantage of leveraged ETFs without a huge capital commitment? Answer: Cut out the middleman and do as the indexers do, trade options on the ETFs.
Inverse and ultra exchange traded funds (ETFs) can be handy arrows to be found in a trader's quiver. The "ultra" funds return two or three times the daily return than a normal ETF. Inverse ETFs can achieve the same goals as a straight out short position without consuming nearly as much margin. What is an ultra ETF? It is an ETF that uses leverage. The 2X ultra aims to double the day's return; the 3X ultra aims to triple the day's return. A fund manager who is limited to having only 10% of his fund allocated to tech stocks could in effect double that exposure with a 2x fund. The ultras also save capital because double or triple the movement can be achieved with the same initial outlays.
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