Leveraged ETF
An exchange-traded fund designed to deliver a multiple of its benchmark's DAILY return -- typically 2x or 3x for bull funds, -1x to -3x for bear/inverse funds. The leverage is reset every trading day, which causes compounding decay over multi-day holding periods (see Volatility Drag, Daily Reset, Compounding Decay). FINRA Notice 09-31 (2009) and subsequent SEC guidance have been explicit that leveraged ETFs are not appropriate for buy-and-hold investors; the products are designed for single-day tactical trading.
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