1. What is a leveraged ETF?
Leveraged ETF is a popular innovative financial derivative in the digital asset industry recently. It has both the characteristics of spots and futures. It is a transactional product that can track a certain multiple of the target asset’s return on a daily basis under the premise of a given underlying asset. When the tracked asset rises or falls, the leveraged ETF will multiply its fluctuations according to the leverage ratio (such as 2 times, 3 times or -1 times, -2 times).
BTC3L: 3 times long BTC. When the BTC spot price increases by 1%, the net value of the product increases by 3%.
BTC3S: 3 times short BTC. When the BTC spot price drops by 1%, the net value of the product increases by 3%.
Leveraged ETF products originated from the traditional financial market, and are essentially funds managed by DigiFinex's senior asset management team. Through the combination of man and machine, positions are dynamically adjusted, allowing investors to easily build their own constant leverage portfolio without understanding the complex mechanisms. While amplifying investment income, it also avoids the risk of liquidation. The ETF model is simple and is no different from ordinary currency transactions. The transaction threshold and risk are lower than traditional futures.
2. Advantages of leveraged ETF
Spot trading: similar to the currency trading mode. No margin is required. They can be traded as spot trading.
High rate of utilization: In spot transactions, when the amount of funds is large, the longer the transaction time span, the higher the cost of funds. When the amount of funds is small, the profit brought by fluctuations is too little. Trading ETFs can multiply returns and become an effective risk hedging tool.
No risk of liquidation. Leveraged ETFs are operated and managed by DigiFinex's senior asset management team. The management team will dynamically rebalance the fund’s investment portfolio and automatically increase and decrease positions based on the profitability of the account to ensure that users will not experience liquidation.
Leveraged ETF allows users to use the mode of spot trading to enjoy the multiple benefits brought by futures contracts.
In short, leveraged ETF products can allow users to avoid the risk of liquidation, and at the same time can obtain multiple returns without margin.
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April 12, 2021
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【ETF】- Introduction of Leveraged ETFFollow
1. What is a leveraged ETF?
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