Airlines Leveraged ETFs 101 and Leveraged Securities Basics

Leveraged ETFs, or exchange-traded funds, are a type of investment that can help you amplify your returns in the airline industry.

These funds use derivatives and other complex financial instruments to achieve a return that's a multiple of the underlying index, such as the airline industry.

To understand how they work, let's start with the basics: a leveraged ETF is a type of security that uses debt to amplify its returns.

The idea is simple: if the airline industry goes up by 10%, a 2x leveraged ETF would go up by 20%, but if it goes down by 10%, the ETF would go down by 20%.

Airlines ETFs are a type of exchange-traded fund that focuses on the airline industry. They can be a great way to gain exposure to the sector with a single investment.

The MAX Airlines -3X Inverse Leveraged ETN (JETD) is one such ETF that tracks the Prime Airlines NR USD index with a weighting of -300%. This means it's designed to provide the opposite performance of the index, making it a potential tool for investors looking to hedge against airline stocks.

The ETF has a relatively small portfolio of 18 securities, with the top 10 holdings constituting 85.4% of the assets. It also has a low expense ratio of 0.95%.

Here are some key statistics about the JETD ETF:

The JETD ETF has a relatively high turnover rate, which can be a concern for investors looking for a more stable investment. However, it's worth noting that the ETF is designed to be traded actively, which may be appealing to some investors.

MAX Airlines is a key focus of the MAX Airlines -3X Inverse Leveraged ETN (JETD). Launched by Bank of Montreal in 2023, this ETF is designed to track the daily inverse performance of the Prime Airlines Index.

The Prime Airlines Index is a net total return index that tracks the stock prices of U.S.-listed companies with operations related to the airline industry. These companies include airlines, aircraft and aircraft parts manufacturers, and those involved in air freight and logistics, aircraft leasing, and airline and airport operations.

The investment strategy of JETD is to provide a three times leveraged participation in the daily inverse performance of the Prime Airlines Index. This means that if the index performs poorly, JETD aims to perform well.

Data as of 1/31/25 shows the JETD Trailing NAV Total Returns.

Inverse and leveraged securities can be complex and volatile, making them a higher-risk investment option.

These securities are designed to perform the opposite of their underlying asset, such as an airline ETF, or to amplify their returns by a specific factor, often 2 or 3 times.

Inverse airline ETFs, for example, aim to rise in value when the airline industry declines, while leveraged airline ETFs aim to multiply the returns of the airline industry by a specific factor.

Leveraged airline ETFs can be particularly volatile, with their values potentially fluctuating rapidly due to the compounding effect of the multiplier.

The 2x airline ETF, for instance, may return 2 times the daily return of the airline industry, but it can also lose 2 times the daily return if the industry declines.

Inverse airline ETFs, on the other hand, may offer a way to profit from a decline in the airline industry, but they can also lose value if the industry rises.

Investors should carefully consider their risk tolerance and investment goals before investing in these securities, as they can be unpredictable and may not perform as expected.