The existence of a leveraged ETF is to ensure that ETF holders enjoy a fixed target multiple of each return on the underlying asset through a fixed leverage-based return. This fixed leverage base is managed by the platform or a fund manager recognized by the platform.
Theoretically, the net asset value is the fair transaction price of ETF shares in the secondary market. However, due to fluctuations in market sentiment, there may be a situation where the transaction price of the secondary market deviates from the fair price (fund's net value) at a certain period of time, resulting in a predetermined premium.
When the premium exists, there will be arbitrage opportunities. Arbiters in the high-level market can gradually eliminate the premium through arbitrage operations to ensure that the price of token transactions closely follows the fair price. For ordinary users, they should pay attention not to deviate too much from the net value of their order, or they will suffer a large loss.
At the same time, when the net worth price is lower than a certain threshold (0.05U in the initial stage), the platform will perform a consolidation operation on the variety (change the net worth price to 10 times before the merger, but the corresponding quantity will also become 1/10 before the merger, The user's total assets will not be affected in any way) to improve the sensitivity of price changes and optimize the trading experience.
Xiaoming, bullish on BTC, bought 10,000 usdt to buy BTC3L (three times as long as Bitcoin), and BTC rose 20% one day later! Leveraged ETFs will rise by 60%! The market value of Xiaoming's hand becomes 16000USDT. Xiaoming has amplified his earnings through leveraged ETFs!
Xiao Ming, bearish on BTC, bought 10,000 usdt to buy BTC3S (three times bitcoin was short), and BTC fell 20% one day later! Leveraged ETFs will rise by 60%! The market value of Xiaoming's hand becomes 16000USDT. Xiaoming shorted BTC through a leveraged ETF and gained three times the return.
Disclaimer: Leveraged ETFs are emerging financial derivatives. The above does not constitute investment advice. Please pay attention to risk control. Leveraged ETFs greatly reduce the risk of strong liquidation, but in extreme conditions, there will be risks of approaching zeroing and liquidation. Please pay attention to the difference between net value and price to avoid suffering losses.