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Reading a leveraged ETF: the words

What the stated multiple, daily reset and decay mean, and why two times a day is not two times a year.

A leveraged ETF aims to deliver its stated multiple over one day. It resets each morning and aims again from wherever it now stands, so a run of days compounds instead of adding up. Over a week the result is close to the stated multiple. Over a quarter it can be far from it, and the more the underlying moves about, the further.

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5 words
01Stated 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.
02Daily 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.
03Compounding
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.
04Decay
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.
05Difference against the stated multiple
The fund’s return minus the stated multiple times the underlying’s return, in percentage points. The one number that says whether a holder got what the fund’s own multiple describes.
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Definitions as ETFIQ uses them for leveraged ETFs. Standards and sources

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ETFIQ, Reading a leveraged ETF: the words, data as of Oct 27, 2026. https://etfiq.com/learn/leverage

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Free to use with attribution for ETFIQ’s data. Not investment advice.