Leveraged exchange traded funds (ETFs) use the futures markets to magnify the returns of a specific index. Leveraged ETFs either look to double or triple the daily return of an index or return the opposite of an index.

The very first ETF, the State Street SPDR Standard & Poor's 500 ETF, was launched in 1993. Since then, the industry has rapidly expanded with ETFs accounting for over $4 trillion in assets.

The first leveraged ETFs didn't appear until 2006. Although these products only occupy a small space in the entire ETF universe, their popularity has grown due to the possibility of higher returns in a very short period of time (provided that trends remain favorable).

Key Takeaways

  • Exchange-traded funds (ETFs) have risen in popularity since the first one was created in 1993.
  • The first leveraged ETF hit the market in 2006 and popularity has been growing ever since.
  • ProShares and Direxion are leading the leveraged ETF space.
  • However, these ETFs are better suited for short-term trading and don't make an appropriate long-term investment strategy due to the expensive cost structure.

ProShares and Direxion are leading the leveraged ETF space. The majority of the most popular products are coming from these issuers. Better suited to short-term trading opportunities, leveraged ETFs usually don't make an appropriate long-term investment strategy due to the expensive cost structure that comes with the high level of trading needed to maintain the fund's positions. Many popular leveraged ETFs have expense ratios of 0.95%.

Leveraged ETFs can be highly volatile and the risk of principal loss with these funds is significant. Regardless, the top ten most traded leveraged ETFs all trade millions of shares daily.

1. The VelocityShares 3x Inverse Crude Oil ETN ETF (DWT)

  • Leveraged factor: 3x
  • Benchmark index: S&P GSCI® Crude Oil

The VelocityShares 3x Inverse Crude Oil ETN ETF (DWT) seeks to replicate, net of expenses, three times the inverse of the S&P GSCI® Crude Oil Index ER.

Instability in the global oil market led to a jump in oil prices and an increased interest in leveraged ETFs for short-term trading opportunities. However, as of March 24, 2020, the ETF ceased trading.

2. The Direxion Daily Gold Miners Bear 2x Shares ETF (DUST)

  • Leveraged factor: 2x
  • Benchmark index: NYSEARCA Gold Miners

The Direxion Daily Gold Miners Bear 2x Shares ETF (DUST) seeks to return triple the inverse of the daily performance of the NYSEARCA Gold Miners Index.

Gold has many physical properties that make it desirable (durability, malleability, conducts heat, and electricity), in addition to being used industrially, in jewelry and as currency. For these reasons, it is one of the most popular precious metals for investment purposes, which makes this ETF in-demand among traders. This ETF trades approximately 26 million shares per day.

3. The ProShares UltraPro QQQ ETF (TQQQ)

  • Leveraged factor: 3x
  • Benchmark index: NASDAQ-100

The ProShares UltraPro Short QQQ ETF (TQQQ) offers three times daily long leverage to the NASDAQ-100 Index. This ETF uses a modified market index, looking to target the largest NASDAQ-traded securities, but it also excludes financial stocks.

Since the NASDAQ 100 is dominated by technology companies, the performance of this ETF is largely dictated by the performance of the technology industry. This ETF trades approximately 65.5 million shares daily.

4. The ProShares Ultra VIX Short-Term Futures ETF (UVXY)

  • Leveraged factor: 1.5x
  • Benchmark index: S&P 500

The ProShares Ultra VIX Short-Term Futures ETF (UVXY) provides one-and-a-half times leveraged exposure to an index comprising first- and second-month VIX futures positions with a weighted average maturity of one month.

This ETF is designed to capitalize on the volatility of the S&P 500. It has a high expense ratio of 1.65% but it trades a high volume every day and has $416 million in assets under management (AUM). This ETF trades approximately 22.5 million shares daily.

5. The ProShares UltraPro Short QQQ ETF (SQQQ)

  • Leveraged factor: 3x
  • Benchmark index: NASDAQ-100

The ProShares UltraPro Short QQQ ETF (SQQQ) provides three times inverse exposure to a modified market-cap-weighted index of 100 of the largest non-financial issues listed on the NASDAQ.

Like the ProShares UltraPro QQQ, the performance of this ETF is largely dictated by the performance of the technology industry which dominates the NASDAQ-100 index. This ETF trades approximately 77.3 million shares daily.

6. The Direxion Daily Gold Miners Bull 3x Shares ETF (NUGT)

  • Leveraged factor: 2x
  • Benchmark index: NYSE Arca Gold Miners

The Direxion Daily Gold Miners Bull 2x Shares ETF (NUGT) provides two times leveraged exposure to a market-cap-weighted index of global gold and silver mining firms. DUST (position number three in this list) and NUGT are by far the two most heavily traded gold ETFs. This ETF trades approximately 29.2 million shares daily.

7. The Direxion Daily S&P 500 Bear 3x Shares ETF (SPXS)

  • Leveraged factor: 3x
  • Benchmark index: S&P 500

The Direxion Daily S&P 500 Bear 3x Shares ETF (SPXS) seeks to provide three times inverse exposure to a market-cap-weighted index of 500 of the largest and most liquid U.S. companies. This ETF is an aggressive bet against the S&P 500. This ETF trades approximately 49.7 million shares daily.

8. The Direxion Daily Junior Gold Miners Index Bear 2x Shares ETF (JDST)

  • Leveraged factor: 2x
  • Benchmark index: Market Vectors Junior Gold Miners

The Direxion Daily Junior Gold Miners Index Bear 2x Shares (JDST) ETF provides daily -2x exposure to an index of junior gold and silver mining companies from developed as well as emerging markets. Overall, these firms tend to be volatile. This ETF trades approximately 24 million shares daily.

9. The ProShares UltraShort S&P 500 ETF (SDS)

  • Leveraged factor: 2x
  • Benchmark index: S&P 500

The ProShares UltraShort S&P 500 (SDS) ETF provides two times inverse exposure to a market-cap-weighted index of 500 large- and mid-cap US firms selected by the S&P Committee. In 2020, this ETF is providing the high liquidity that is the best-case scenario for a geared fund. This ETF trades approximately 24 million shares daily.

10. The ProShares UltraPro Short S&P 500 ETF (SPXU)

  • Leveraged factor: 3x
  • Benchmark index: S&P 500

The ProShares UltraPro Short S&P500 ETF (SPXU) seeks the daily return of three times the inverse of the S&P 500. provides -3x exposure to a market-cap weighted index of 500 of the largest and most liquid US companies. In 2020, this ETF is providing high liquidity that is the best-case scenario for a geared fund. This ETF trades approximately 42.8 million shares daily.