Leveraged Mid Cap ETFs Explained

Leveraged Mid Cap ETFs can be a powerful tool for investors looking to amplify their returns in the mid cap market. They use financial derivatives, such as futures and options, to achieve a multiple of the daily performance of the underlying index.

These ETFs can be a good option for investors who want to gain exposure to the mid cap market, but may not have the time or expertise to actively trade individual stocks. The ProShares Mid Cap S&P 400 Dividend Aristas ETF, for example, aims to provide a multiple of the daily returns of the S&P 400 Dividend Aristocrats Index.

Leveraged ETFs can be more volatile than non-leveraged ETFs, which can result in significant losses if the market moves against them. The ProShares UltraPro Mid Cap S&P 400 ETF, for instance, uses a 300% leverage, which means it aims to return 300% of the daily performance of the S&P 400 Index.

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MIDU is the ticker symbol for the Mid Cap Bull 3X ETF, which seeks daily investment results before fees and expenses of 300% of the price performance of the Russell Midcap Index.

Leveraged ETFs like MIDU aim to provide returns that are three times the daily performance of their underlying index, in this case, the Russell Midcap Index.

The Mid Cap Bull 3X ETF is designed to benefit from the growth of mid-cap stocks, but there is no guarantee it will meet its stated investment objective.

If the Russell Midcap Index returns 15% in a day, the MIDU ETF aims to provide returns of 45%, and vice versa.

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The Pricing & Performance of a leveraged mid cap ETF is a crucial aspect to consider before investing. The fund's net asset value (NAV) and market price as of January 13, 2025, are available.

The fund's NAV and market price have shown a slight decrease over the past month, with the NAV falling by 21.28% and the market price falling by 21.39%. This decline is also reflected in the year-to-date (YTD) returns, with the NAV and market price both down by 20.28% and 20.35%, respectively.

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The fund's 1-year returns are also negative, with the NAV and market price both down by 20.28%. However, the 3-year returns are more concerning, with the NAV down by 7.94% and the market price down by 7.95%.

Here's a summary of the fund's performance over different time periods:

It's essential to note that short-term performance is not a reliable indicator of the fund's future performance. The expense ratio of the fund is 1.06% (gross) and 1.03% (net), which is relatively high compared to other funds in the market.

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The distribution schedule for a leveraged mid cap ETF can be a crucial factor to consider when investing. The distribution dates listed are December 23, 2024, September 24, 2024, June 25, 2024, and March 20, 2024.

These dates are important because they determine when investors will receive dividend payments. The income dividend for the December 23, 2024 distribution is $0.13132.

Here's a breakdown of the distribution dates and income dividends:

It's worth noting that these dates and dividend amounts are subject to change and should be verified through the ETF provider or other reliable sources.

Leveraged ETFs don't guarantee a higher return on their underlying index or asset, even if that's the goal.

A 3x leveraged ETF aims to provide returns that are three times the daily performance of the underlying index. For example, if the underlying index returns 15% in a day, the ETF aims to provide returns of 45%.

There is no guarantee that a leveraged ETF will meet its stated investment objective. The Mid Cap Bull 3X ETF, for instance, seeks daily investment results before fees and expenses of 300% of the price performance of the Russell Midcap Index, but it's not a promise.

Leveraged ETFs aim to provide returns that are three times the performance of the underlying index or asset.

These funds don't guarantee a higher return, but rather aim to amplify the gains or losses of the underlying index.

A 3x leveraged ETF might return 45% if the underlying index returns 15% in a day, but this also means it could lose 45% if the index loses 15%.

The goal of a 3x leveraged ETF is to provide a multiple of the underlying index's performance, but there's no guarantee it will meet its stated investment objective.

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ETFs distribute income and capital gains to investors on a regular basis. This is typically done quarterly.

The record date, ex date, and pay date are all important dates to note. The record date is the date by which you must own the ETF to receive the distribution. The ex date is the date after which you will no longer be eligible to receive the distribution if you sell your shares. The pay date is the date on which the distribution is paid out.

Here are the distribution dates and amounts for the ETF:

As you can see, the income dividend amounts vary from quarter to quarter. The short-term and long-term capital gain amounts are currently zero.

Decay is a common issue with leveraged ETFs. Leveraged ETFs need to rebalance their holdings daily to maintain the proper levels of leverage.

This process involves buying or selling securities to maintain the desired level of leverage, which can add trading and management fees. These fees can significantly change the price action of the ETF.

Leveraged ETFs are designed to track the performance of a specific index, but they can deviate from the index's performance due to decay. This is because the daily rebalancing process can lead to differences in the ETF's price action compared to the underlying index.

According to Fidelity, leveraged ETFs are designed to provide a multiple of the daily return of the underlying index. For example, a 3x leveraged ETF aims to provide three times the daily return of the underlying index.

The Securities and Exchange Commission notes that the distribution of leveraged ETF returns can be volatile due to the daily rebalancing process. This volatility can result in significant deviations from the underlying index's performance.

Here are some key points to keep in mind when considering leveraged ETFs:

There are other types of leveraged ETFs beyond the 3x leveraged ETFs, such as 2x leveraged ETFs, which offer up to two times higher returns or two times the losses.

These ETFs serve the same investing purpose as 3x leveraged ETFs, but with a different multiplier.

Leveraged ETFs are not meant for every investor's portfolio, so it's essential to think over all your options before investing your money.

In the long run, understanding the difference between leveraged and inverse leveraged ETFs is crucial. Leveraged ETFs earn returns when the underlying index goes up, while inverse leveraged ETFs earn returns when the underlying index goes down.

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Leveraged ETFs work by using derivatives like swaps and futures to amplify volatility, which can be riskier than holding common shares of the stock.

These financial products are the bulk of a 3x leveraged ETF's holdings, allowing it to generate three times the returns of the underlying index.

This also means 3x leveraged ETFs will generate losses that are three times that of the index, making them a high-risk investment.

Here are some key takeaways about 3x leveraged ETFs:

A 3x ETF is a type of investment that aims to generate three times the returns of the underlying index. It's not a guarantee, though - if the index returns 15% in a day, the ETF aims to return 45%.

The bulk of a 3x ETF's holdings are usually derivatives like swaps and futures, which add risk and leverage compared to holding common shares of the stock. This means 3x ETFs are riskier bets than simply holding the stocks outright.

To put it simply, if the underlying index returns 15%, the 3x ETF aims to return 45%, and vice versa. This means a 15% loss in a day for the index should translate into a 45% loss for the ETF.

Here are some key points to keep in mind:

It's essential to understand that leveraged ETFs are not suitable for long-term investments.

The daily return is what matters, not the annual return.

This means that 3x leveraged ETFs, for example, are not a good fit for long-term plans.

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Leveraged mid cap ETFs are designed to provide a multiple of the daily performance of the S&P 400 Mid Cap Index.

These funds use derivatives to amplify returns, which can be both a blessing and a curse.

The leverage factor is typically 2x or 3x, meaning the fund aims to return twice or three times the daily performance of the underlying index.

This can result in significant gains during strong market periods, but also increases the risk of losses during downturns.

The S&P 400 Mid Cap Index is a market-capitalization-weighted index that tracks the performance of mid-cap companies in the US.