Nvidia Leveraged ETF Explained for Beginners and Investors

Nvidia Leveraged ETFs are a type of exchange-traded fund that aims to provide a multiple of the daily performance of Nvidia's stock.

These funds use financial derivatives and other complex strategies to achieve their goal, which can be both a blessing and a curse for investors.

Nvidia's market capitalization has grown significantly over the years, making it one of the largest companies in the world.

Investors who are new to the world of ETFs may find the concept of leveraged investing overwhelming, but it's worth understanding the basics before diving in.

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The GraniteShares 2x Long NVDA Daily ETF is a leveraged ETF that aims to provide daily investment results of 2 times the daily percentage change of NVIDIA's common stock.

It's operated by GraniteShares, a privately held ETF provider founded in 2016, which focuses on innovative investment solutions.

The ETF's stated investment objective is to track the daily performance of NVIDIA, which means it's designed to move in tandem with the company's stock price on a daily basis.

There's no guarantee that the ETF will meet its objective, and investors should be aware of this risk.

The fund is not designed to provide 2 times the cumulative return of NVIDIA for periods longer than a day, so investors should keep this in mind when considering the ETF.

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The NVIDIA leveraged ETF is a complex investment product, and it's essential to understand its key facts and details before investing.

The fund has a unique goal: to seek daily investment results, before fees and expenses, of 1.5 times (150%) the daily percentage change of the common stock of NVIDIA Corp (NASDAQ: NVDA).

The performance data quoted provides historical context, but it's crucial to note that past performance is not a guarantee of future results.

The fund's returns are based on a total return basis, which means they include both income and capital gains.

Here are the fund's returns for various time periods:

It's also worth noting that the management fee has been waived, which would have reduced the fund's returns.

Leveraged ETFs are not as simple as they seem. Double returns mean both greater gains and greater losses, so if a stock plummets, the fund will plummet even more sharply.

The GraniteShares 2x Long NVDA Daily ETF is designed to follow the one-day performances of Nvidia, not its weekly or monthly performances. Over longer periods of time, the fund's performance may not match the performance of the stock.

A $10,000 investment in this fund will result in $115 per year in fees, which is a whopping 1.15% expense ratio. Buying and holding Nvidia shares costs nothing aside from transaction fees.

The ETF did not generate twice the return of Nvidia shares over the last three months, and some of the shortfall was due to fees and complicated factors. The key takeaway is that at various times over the last three months, the returns from owning shares of the fund were almost identical to the returns from owning Nvidia stock.

This fund is not designed for investors, it's meant for traders. The fund's investment prospectus clearly states that it should not be expected to provide 2 times the cumulative return of NVDA for periods greater than one day.

A -3 times leveraged ETF, like the ETP Securities, is designed to provide -3 times the value of the daily performance of the NVIDIA Corporation equity security, net of fees and expenses.

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