Ultra ETF

Dictionary Says

Definition of 'Ultra ETF'

A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark. The first ultra ETFs were launched in 2006 and the class has grown to include different ETFs with underlying benchmarks ranging from broad market indexes, such as the S&P 500 and Russell 2000, to specific sectors, such as technology, healthcare and basic materials.
Investopedia Says

Investopedia explains 'Ultra ETF'

According to the prospectuses for these funds, they may not achieve double the return of the benchmark during flat markets. Long-run returns may also diverge from the desired return; the ultra ETFs' only aim is to achieve twice the daily return, which they have done fairly accurately in the short time they can be analyzed.

Ultra ETFs can be beneficial to investors who are short on capital or allocation space within a diversified portfolio. For example, they can invest 5% of their portfolios into an ultra ETF and gain closer to 10% exposure due to the leveraged returns.

Increased daily volatility is both the biggest benefit and greatest danger of ultra ETFs. They are best suited to short-term investing strategies or quick trading to maximize a given bet in the market. The expense ratios also run much higher than for standard ETFs, as most charge 0.95% of the total assets.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Leverage

    1. The use of ...
  2. Leveraged ETF

    An ...
  3. Exchange-Traded Fund - ETF

    A security that ...
  4. Expense Ratio

    A measure of ...
  5. American Stock Exchange - AMEX

    The ...
  6. Reverse Gold ETF

    Exchange traded ...
  7. Risk Capital

    Investment funds ...
  8. Futures Contract

    A contractual ...
  9. Futures

    A financial ...
  10. Hong Kong Stock Exchange (HKG) .HK

    One of the ...

Articles Of Interest

  1. Ultra ETFs: The Ultimate Addition To Your Portfolio?

    Ultra ETFs can add huge returns to your portfolio, but there's a lot of risk and volatility involved with these leveraged ETFs.
  2. Leveraged ETFs: Are They Right For You?

    This specialty vehicle offers dramatic results, but can also magnify risk.
  3. 4 Ways To Use ETFs In Your Portfolio

    To take full advantage of these vehicles, you need to know how they can fulfill certain strategies.
  4. Exchange-Traded Funds (ETFs)

    This vehicle combines the diversification of a mutual fund with the flexibility of a stock. Learn more about them here.
  5. ETF Liquidity: Why It Matters

    Lower levels of liquidity in exchange-traded funds make it harder to trade them profitably.
  6. ETFs: How Did We Live Without Them?

    These funds burst onto the scene in 1993 and have continued to provide new opportunities for investors since.
  7. Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  8. Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.
  9. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
  10. Investors: Rely On Your Gut

    Find out how your personality and natural instincts can direct your investment choices.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center