Are There ETFs Tracking 2X Monthly or Quarterly Returns Instead of 2X Daily? [Weekend Money]

Tradrs' "Calendar Reset" Leverage Products Explained

Russell Tenser, CEO, Visits Korea

Recently, single-stock leveraged ETFs that track twice the daily return have shown vulnerability in volatile markets, experiencing a series of sharp declines. In response, overseas asset management firms have attracted attention by introducing monthly or quarterly leveraged ETF products aimed at addressing this "negative compounding" effect.

On September 17, Russell Tenser, CEO of the American leveraged ETF brand Tradrs, held a press conference in Korea and stated, "If you hold a daily return leveraged product for one month or one quarter, it is almost certain that you will not achieve the stated double return," adding, "However, if you invest in a leveraged product that resets monthly or quarterly, you can match double the return for that period."

Tradrs ETF Major Product Categories. Access Communication

Leveraged products that track daily returns are particularly vulnerable to the so-called "negative compounding" effect during periods of high volatility, eating away at returns. For example, if you assume an index of 100, a 10% increase on the first day followed by a 10% decrease the next day would nearly bring the index back to its original level, from 100 to 110 and then to 99. In contrast, a leveraged product would move from 100 to 120, then down to 96. While the benchmark index drops 1%, the leveraged ETF falls 4%, making the loss four times greater.

This is why, according to Tenser, they launched "calendar reset ETF" products. These ETFs set their target returns on a monthly or quarterly basis, rather than daily. Tradrs is the first in the market to introduce this type of product. Their current lineup includes the 'Tradr 2X Long Innovation 100 Monthly ETF (MQQQ),' which offers monthly leverage on the Nasdaq 100 ETF QQQ; the 'Tradr 2X Long Innovation 100 Quarterly ETF (QQQP),' a quarterly leveraged version; and the 'Tradr 2X Long SPY Quarterly ETF (SPYQ),' which provides quarterly leverage on the S&P 500 ETF SPY.

Tenser explained, "As the name 'calendar reset' suggests, these are products designed to allow you to invest with leveraged exposure from the start to the end of a calendar month, or from the first to the last day of a calendar quarter."

So, what criteria should investors use to choose between daily and calendar reset products? Tenser gave examples based on investor preferences and circumstances. He noted that in today's highly volatile market, "Investors looking to the market from a long-term perspective and seeking to enhance returns using leverage should consider monthly or quarterly reset products. Conversely, if an investor is able to monitor their investments closely and believes the market is currently experiencing undue selling pressure or overheating, then daily reset leveraged ETFs related to AI could be a better fit."

However, Tenser stressed that all leveraged products carry the potential for losses. "Regardless of whether a leveraged product resets daily, monthly, or quarterly, there is always both upside and downside potential," he said. "For this reason, investors should always consider their own risk tolerance and investment horizon before making decisions."

Tradrs is a leveraged and inverse ETF brand under AXS Investments. The firm manages more than 5 billion US dollars in assets and offers over 80 products. AXS Investments was the first to introduce single-stock leveraged ETFs to the US market in 2022.

This content was produced with the assistance of AI translation services.