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Leveraged/Inverse ETFs

Updated on March 13, 2023

Inverse/Leveraged ETFs are also called ‘short’ funds that seek to provide returns which are opposite to that of the index or benchmark they track. Leveraged and inverse ETFs also track market indices like traditional ETFs. These can be sector-specific, commodity or currency based. Inverse ETFs seek to profit from downtrending markets and make use of futures contracts, swaps and other similar instruments for achieving their objectives. These ETFs are monitored and settled on a daily basis for achieving their targets.

Characteristics of Leveraged/Inverse ETFs

Characteristics of Leveraged/Inverse ETFs are:
a) Inverse/Leveraged ETFs are also known as ‘Short ETFs’ as they are similar to holding short positions in stocks, which means borrowing securities and selling them in the hope of profiting later after repurchasing them at lower prices.
b) These are complex instruments and not exactly for retail investors.