Capitalizing on Negativity: Tech Stocks

Your capital is at risk if you invest. You could lose all your investment.

Please see the full risk warning at

Private investors typically buy into the market when they perceive an upward trend in the market. However, there frequently arises a scenario wherein it is possible to make profits when the opposite is true. It is also possible to benefit when there is an adverse report about a company’s business practice is known or when there is a downward trend in the market.

Leverage Shares ETP offers a solution in the form of single-stock Short & Leveraged Exchange Traded Products (S&L ETPs) which are purpose-built for such scenarios. These ETPs are built around some of the most heavily traded U.S. tech and finance stocks, which presently account for a quarter of the S&P 500 and nearly half of the Nasdaq 100.

Shorting on Adverse Reports

In early August, it was reported that Micron Technology Inc (MU) would not be supplying components to Huawei following a ban on Huawei phone sales in the United States. MU accounts for about 0.2% of the S&P 500 index (GSPC). While the index had largely recovered from the pandemic-induced downturn that began in mid-January by this time and was holding steady, MU suffered a fall on account of a loss of a crucial customer.

Being invested into the Leverage Shares -1x MU ETP (tickers: MUS (US$) /SMU (GBP) / SMUE (EUR)) – which is equivalent to a -1x daily short position in the stock – on 11th of August (when the company lowered guidance) for a period of 10 trading days would have yielded a substantial benefit to the investor:
While being invested into GSPC would have yielded a 2% gain in this period, being invested into the -1x MU ETP would have yielded almost 9%.

Given that MU had fallen far behind the performance of its parent index due to an adverse report at a time when the parent index was doing well, an investor might think that the chances of betting against a stock when the market is in a downturn isn’t favorable. This isn’t always the case.

Shorting on Market Downturn

In the opening days of September, all major indices had a substantial drop in value, following concerns that long-term growth outlooks on leading companies were far too optimistic to be realistic. AMD, a champion outperformer of the market since the pandemic’s effects were seen worldwide and which comprises about 0.3% of GSPC, was no exception. However, relative to the downward trend in the market, AMD’s fall was slightly more pronounced.

Being invested into the Leverage Shares -1x AMD ETP (tickers: AMDS (US$)/SAMD (GBP) / SAME (EUR)) on 2nd of September for a period of 14 trading days would have yielded a substantial benefit to the investor:
While being invested into GSPC would have yielded a 7% loss in this period, being invested into the -1x AMD ETP would have yielded a gain of almost 14%.

A point of commonality in both cases is the fact that there was a “trend” in the patterns seen, i.e. both MU and AMD largely had a downward trajectory throughout the period under examination. The daily compounding formula within the ETPs heavily rewards (or penalizes) this aspect.

Daily Compounding of ETPs: A Primer

The daily “reset” feature of the ETP brings into effect a daily compounding effect that can often deliver more in gains than the leverage factor would imply.

For instance, consider a 2x Leveraged ETP in an upward trending market scenario with a 5% rise every day. Starting from Day Zero with an investment of 100 Euros, the 10-day performance would be as thus:
It can be seen that the daily compounding formula adds nearly 33% in gains over a 10-day period when compared to the expectations of a 2x investment in the underlying asset.

During days with choppy markets, oscillations around the mean would impact the product’s performance. Assuming a rise of 5% in a single day followed by a drop of 5% in the next would result in a 10-day performance as thus:
It can be seen that an expected shortfall of 2% was magnified to more than twice that amount because of the daily compounding formula.

However, another form of choppy market behavior is oscillation around a trending mean. In such a scenario, the product’s performance would converge close to the expectation of a 2x investment in the underlying asset. For instance, assuming a fall of 1.9% in a single day followed by a rise of 4% in the next would result in a 10-day performance as thus:
In this case, it can be seen that the product’s performance mirrors that of a 2x investment in the underlying effect.

From these illustrations, it can be summarized that when it comes to leveraged ETPs, “the trend is your friend”.

Value Proposition for Leverage Shares’ ETPs

The prime features that would be of interest to the private investor are as follows:

  1. These products are physically backed (i.e., they hold the underlying assets), a unique feature among leverage products, which implies substantially lowered credit risk.
  2. Investors do not require a margin account to invest in these ETPs, which means they cannot lose more than their original investment.
  3. They have low and transparent fees, comprising of an arranger and interest margin fee.
  4. They are traded on a regulated securities exchange, unlike Contract for Differences (CFDs) that are typically traded over the counter.
  5. A dedicated market (BNP) ensures continuous bid/offer prices for the products at tight spreads, unlike most other leveraged products.

It is important to note that the scenarios depicted here show a trend extending over several days. However, in practice, it is not unusual to see a trend that lasts only a day or two. It is also possible to earn gains with this if an investor is tapped into market news and company reports. Thus, an investor with a keen eye on the market would be well-positioned to maximize gains whenever an outperformer is apparent for any period of time. In the event that this outperformance is seen in a stock with a downward trajectory, investing into one of Leverage Shares’ -1x ETPs is a safer and cheaper means of making gains in tumultuous times.

Your capital is at risk if you invest. You could lose all your investment.

Please see the full risk warning at

Education Series: Single-Stock ETPs

Authored by

Sandeep Rao

Share this:

Share on facebook
Share on twitter
Share on xing
Share on whatsapp
Share on telegram
Share on email

Related Posts

A quick study on the effects of market behaviour on the returns of a 3X ETP vs a 2X ETP.
A quick study on the effects of market behaviour on the returns of a 3X ETP vs a 2X ETP.


Generic filters
Exact matches only
Search in title
Search in content
Search in excerpt
Filter by Categories
Market Insights

Welcome to Leverage Shares

Terms and Conditions


If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.

If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.

Risk Warnings

The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.

This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.

Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.

This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.

United States Visitors

The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.

Persons accessing this website in the European Economic Area

Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).

Exclusion of Liability

Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.

Leverage Investment

Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.


Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.

This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2. The contents of this website have been approved under S21 of the Financial Services and Markets Act 2000 by Resolution Compliance Limited. Resolution Compliance Limited is authorised and regulated by the Financial Conduct Authority (FRN 574048).

By clicking you agree to the Terms and Conditions displayed.