The question
A fund says "3x QQQ". If QQQ rises 10% this year, do I get 30%?
The idea
- A leveraged ETF aims to return a multiple of an index's move, such as 2 or 3 times. An inverse ETF aims for the opposite, such as −1 or −3 times. The promise has one word that changes everything: daily. The fund targets its multiple for each day only.
- To do that, it resets every day. Picture a hypothetical 3x fund worth $100 with $300 of exposure (the amount of the index it gains or loses on, held through futures or swaps):The index rises 10%. The exposure gains $30, so the fund is worth $130. To be 3x again, it needs $390 of exposure, so it adds $60.The index then falls 10%. The fund loses $39 and is worth $91.
- The index went 100 → 110 → 99: down 1%. Three times that is −3%, but the fund is down 9%. Each day was exactly 3x; the two days together were not. Beyond one day, the path decides the result.
Worked example
The 3 steps beside the drawing at the top work this through on ETFIQ data. Point at a step to light the part of the drawing it describes.
TQQQ targets 3 times QQQ's daily return; SQQQ targets −3 times. Window: the 30 days from Oct 9, 2026 to Nov 10, 2026.
Neither fund delivered 3 times the month's move. Both did what they promise: 3 times each day.
The common mistake
"A 3x fund gives me 3 times the index over whatever period I hold it." It gives 3 times each day. Over a month or a year, a steady trend can beat 3 times the move; choppy days can fall well short. Lesson 5 measures that shortfall.
Check your understanding
Pick an answer to see why. Two of three right passes the lesson.
1. What does a 3x daily leveraged ETF aim to deliver?Answer: A. 3 times the index's return each day, before fees. the target applies to one day and resets daily. Not B: over longer periods the resets compound along the path.2. An index rises 5% one day and falls 5% the next (hypothetical). About what does a perfect 2x daily fund return over the two days?Answer: B. −1%. 1.10 × 0.90 = 0.99, a 1% loss. Not A: the index fell about 0.25% (1.05 × 0.95 = 0.9975), and 2 times that is −0.5%, but the fund compounds each day's 2x move.3. In the 30 days to Nov 10, 2026, SQQQ returned more than −3 times QQQ's move. What explains the extra?Answer: D. Interest earned on its collateral, on top of its daily multiple. compounding changed the result by −0.22 points against −3 times the month, and the fund finished 1.87 points above its daily multiple, where an inverse fund's collateral interest shows up. Not A: the multiple stayed −3 daily; the gap came from collateral interest.
Takeaways
- A leveraged or inverse ETF promises its multiple for one day at a time.
- Over longer periods, the path decides: steady trends can help, choppy days hurt.
- Check a fund's daily miss on its Tracking tab and its period result on the leverage desk.