Smaller & Leveraged/Inverse ETFs

Level: Intermediate · About 12 min · 6 slides + PDF

Leveraged and inverse ETFs aim to deliver a multiple (2x, 3x) or the opposite (−1x, −3x) of an index or stock's move for one day. ADT uses bull/bear pairs to trade big names with a smaller ticker. They reset daily, so they're built for short-term trades, not buy-and-hold.

🔑 Key takeaways

• A 3x ETF targets 3× the daily move of its index. It is one day only.
• Daily resets mean holding for weeks can drift far from 3× the index return, even the wrong way.
• Single-stock bear funds are often −1x, not −2x. Check the fund's target.
• For options on these ETFs, check open interest and the bid/ask spread. For shares, watch volume.
• Read the prospectus. Products, leverage and tickers change.

✅ Your homework

1. Pick one pair (e.g., TQQQ/SQQQ). Write down its index and daily target.
2. Compare a 5-day chart of QQQ vs. TQQQ. Is TQQQ's return exactly 3×?
3. Check the bid/ask spread and volume of SOXL and SOXS at 10 AM ET.
4. Open the attached ETF list PDF and find 3 sector funds you didn't know.

📎 Resources

• Leveraged & Inverse ETF List (PDF, Direxion product list dated 3/26/2025)
• SEC/FINRA investor alert: Leveraged and Inverse ETFs: Specialized Products with Extra Risks for Buy-and-Hold Investors (investor.gov)
• ADT Academy: https://americandreamtradingacademy.com