The following are the advantages of leveraged ETF:
- Spot trading and no need of margin
Investors can trade leveraged ETF on BKEX with the same process of spot trading. There is no margin required, so no liquidation problem. Take purchasing BTC3L (3x long of BTC) as an example. Users only need to check the net value, select the proper price, and enter purchase quantity to buy BTC3L.
- Compound-interest effect and risk limitation
The profit of the leveraged ETF product will be transferred to the principal automatically by the system. That is, if a user is gaining profit from the leveraged ETF he bought, the profit will be added to the principal in the next rebalance period (every day). As a result, the user’s position of the 3x leveraged ETF product will increase to gain compound-interest effect.
Besides, leveraged ETF brings in risk-control mechanism (refer to the details in the following part). For example, if BTC falls by 33%, the 3 times BTC long contract will be liquidated undoubtfully, while the leveraged ETF product BTC3L, through rebalance mechanism, will not approach zero. There will be some asset left.
Leveraged ETF is an emerging financial product. The content above does not constitute investment advice. Please watch out investment risks.
Leveraged ETF reduces the risks of liquidation, but in extreme conditions there’s possibility that the price will approach zero and be liquidated. Please pay attention to the difference between order price and net value, to avoid losses.