A leveraged ETF aims for a multiple of one day’s move in its index, such as two or three times.
An inverse ETF aims for the opposite of that move.
Each resets its exposure every day.
Volatility decay
Over one day the multiple holds. Over longer periods it does not.
Say an index rises 10% and then falls 10%. It ends down 1%.
A fund at two times rises 20% and then falls 20%. It ends down 4%.
That gap is called volatility decay.
Trading costs on top
Leveraged funds are often held for days, not years. Each buy and each sell pays about half the spread, so a round trip pays all of it.
Over a short holding, the spread can matter more than the fee.
266 leveraged and inverse ETFs had a median 30-day spread of 0.27% to Oct 22, 2026.
Placing an order
The fair limit is midpoint + X¢ to buy, midpoint − X¢ to sell.
X is half the fund’s typical spread in cents, rounded up, and never less than 1¢.
These funds can move fast, so a limit may need moving to fill. The limit orders guide covers the rule.