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Leveraged ETFs reset daily leverage, driving both amplified gains and decay risk
The guide describes how leveraged ETFs use swaps and futures to target a multiple of an index's daily move, but performance over longer periods can diverge sharply from the simple multiple.
Leveraged ETFs are designed to deliver a multiple of an underlying index or asset's daily return, using derivatives such as swaps and futures contracts, according to Yahoo Finance.
The article gives the example of a 3x Nasdaq-100 fund targeting a +3% move when the Nasdaq-100 rises 1%, and -3% on a 1% decline, emphasizing that the “daily” target resets each night and is not meant to be held as a multi-day or multi-year position.
It warns that daily compounding over longer horizons can produce results that differ significantly from 3x the underlying index return, with outcomes that can be either better or worse depending on the market path.
The piece also links the growing popularity in 2026 to forces including an AI infrastructure build-out that boosted semiconductor stocks, plus retail investor access through commission-free trading and mobile-first brokerage platforms.
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