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A key benefit of S&L ETPs is their variety. There are ETPs giving exposure to currencies, commodities, debt, and alternatives. Nevertheless, equity remains the crown jewel as approximately 85% of investments are directed towards equity indices and benchmarks1. Hence, sophisticated investors have been able to use these methods of tactical trading to complement their traditional ‘buy and hold’ strategies.
Structure of leveraged ETPs
One discouraging attribute of leveraged ETPs until now has been their form of replication. Until recently, companies offering these products (including leveraged ETFs) have been able to achieve the needed amount of gearing via synthetic replication. This means that the ETP is not backed by the underlying asset but instead the company enters into a total return swap agreement or futures contract with a counterparty. Sometimes as little as 10% of the capital is actually invested in the equities being tracked. Although backed by collateral, this type of replication still exposes the ETP investor to additional perils as they now have exposure to both market and counterparty risk.
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
A distinguishing feature of Leveraged Shares ETPs is that all of the products are physically backed. A $100 investment in one of our ETPs gives the investor an exposure worth $200 to the underlying security (excluding fees), as Leverage Shares invests all of the cash proceeds in the securities being tracked.
If the 2x ETP has $100 in net assets, $200 of net exposure to the ETP assets needs to be maintained.
2. Underlying stock price increases by 5%When the index rises 5% during the trading day, the ETP rises by twice that amount (10%) and the total exposure to the ETP rises to $210.
3. ETP exposure modifiedAs exposure needs to be two times that of the ETP assets ($110 x 2 = $220) at the beginning of each trading day, an additional $10 of underlying securities must be purchased to maintain the needed exposure of 2x.
In the opposite scenario, where the ETP value falls to $90 due to a 5% decline in the underlying stock (meaning a $10 fall in ETP value), the exposure would fall to $190 during the day. Thus, to maintain the 2x multiple, the total exposure to the ETP would need to be reduced by $10 ($90 x 2 = $180).So where does the additional capital for the needed leverage come from? When an ETP is issued, that entire proceeds plus a matching margin loan provided by Interactive Brokers is invested in the underlying security (stocks like Amazon and Netflix). Moreover, additional cash proceeds (like dividends received from the underlying securities) are also invested to purchase additional securities. In this manner, the 2x ETPs are always fully collateralized.
SOURCE: 1. Wisdomtree, SHORT & LEVERAGED ETPs Global Flows
Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.
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En vous inscrivant ici, vous acceptez notre politique de confidentialité et vous recevrez nos bulletins d’information. Vous pouvez vous désabonner à tout moment en suivant le lien figurant au bas de chaque lettre d’information.
This is a marketing communication. Please refer to the Prospectus of the ETPs and to the KIID before making any final investment decisions.
This information originates from Investium Limited, which has been appointed as distributor of Leverage Shares products in Europe by Leverage Shares Management Company Limited (the “Arranger”). Investium Limited with registered address at 6 Nikou Georgiou Street, Office 302, 1095 Nicosia Cyprus, is a financial services provider regulated by the Cyprus Securities and Exchange Commission (CySEC).
The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. Investium Limited and the Arranger (together referred as “Leverage Shares”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of Leverage Shares. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed.
All performance information is based on historical data and does not predict future returns. Investing is subject to risk, including the possible loss of principal. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Leverage Shares.
© Leverage Shares 2024
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This website is for informational purposes only.
This website is accessible to retail investors in the EU for informational purposes only. Leverage Shares does not directly distribute to retail investors. Retail clients should not rely on any of the information provided and should seek independent financial advice.
Information contained in this website is intended only to provide general and preliminary information and does not constitute any legal or investment advice, an offer to sell or solicitation to buy any security, including shares of any Exchange Traded Products (“ETPs”).
An investment in the promoted ETPs may only be made based on the ETPs´ legal documentation and will be subject to terms and conditions contained therein.
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. The ETPs shown on this website are not available for sale in the U.S. or to a U.S. person.
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Please confirm the Terms and Conditions by clicking on “I agree”
This website is for informational purposes only.
Information contained in this website is intended only to provide general and preliminary information to EU regulated firms such as Investment Intermediaries and Asset Managers. This information does not constitute an offer to sell or solicitation to buy any security, including shares of any Exchange Traded Products (“ETPs”).
An investment in the promoted ETPs may only be made based on the ETPs´ legal documentation and will be subject to terms and conditions contained therein.
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. The ETPs shown on this website are not available for sale in the U.S. or to a U.S. person.
I acknowledge having my legal residence in the selected location.
Please confirm the Terms and Conditions by clicking on “I agree”
This website is for informational purposes only.
This website is accessible to retail investors in the UK for informational purposes only. Leverage Shares does not directly distribute to retail investors. Retail clients should not rely on any of the information provided and should seek assistance from an IFA for all investment guidance and advice.
Information contained in this website is intended only to provide general and preliminary information and does not constitute any legal or investment advice, an offer to sell or solicitation to buy any security, including shares of any Exchange Traded Products (“ETPs”).
An investment in the promoted ETPs may only be made based on the ETPs´ legal documentation and will be subject to terms and conditions contained therein.
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. The ETPs shown on this website are not available for sale in the U.S. or to a U.S. person.
I acknowledge having my legal residence in the selected location.
Please confirm the Terms and Conditions by clicking on “I agree”
This website is for informational purposes only.
Information contained in this website is intended only to provide general and preliminary information to FCA regulated firms such as Independent Financial Advisors (IFAs) and Wealth Managers. This information does not constitute an offer to sell or solicitation to buy any security, including shares of any Exchange Traded Products (“ETPs”).
An investment in the promoted ETPs may only be made based on the ETPs´ legal documentation and will be subject to terms and conditions contained therein.
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. The ETPs shown on this website are not available for sale in the U.S. or to a U.S. person.
I acknowledge having my legal residence in the selected location.
