Reading a leveraged ETF: the words

What the stated multiple, the daily reset, compounding and decay mean on a leveraged or inverse ETF, and why two times a day is not two times a year.

A leveraged ETF states a multiple and delivers it over a single day. It resets each morning and aims at the multiple again from wherever it now stands, so a run of days compounds rather than adds. Over a week that is close to what the stated multiple describes. Over a quarter it can be a long way from it, and the more the underlying moves about, the further.

Stated multiple

What the fund sets out to return against its underlying, each day. A fund at 2x aims to return twice the underlying’s daily move, and an inverse fund at -2x aims to return twice it in the opposite direction.

Daily reset

The fund starts each day aiming at the multiple again, from wherever it now stands. It is the mechanism that makes these funds behave as they do, and the reason the stated multiple applies to a day rather than to a holding period.

Compounding

Daily results multiply together rather than adding up. Two days of the multiple is not twice the multiple, and over a run of days the difference between the two grows with how far the underlying moves about.

Decay

What compounding costs a holder when the underlying falls and rises back to where it started. The underlying is level and the fund is down; the more violently it moved, the further down.

Difference against the stated multiple

The fund’s return minus the stated multiple times the underlying’s return, in percentage points. The one figure that says whether a holder got what the fund’s own multiple describes.

Where to next

Definitions as ETFIQ uses them for leveraged ETFs. Every figure on the site is stated arithmetic on published data. Standards and sources

Cite this page. ETFIQ, Reading a leveraged ETF: the words, data as of Sep 13, 2026. https://etfiq.com/learn/leverage Free to use with attribution; the underlying files are at Open data.