Crunching the numbers: Leveraged trading
If a regular silver mining ETF drops 5%, the 3x leveraged silver mining ETF is designed to fall 15%. So if that 15% fall takes the price from $10 to $8.50, the daily re-balancing will reduce the exposure based on the new asset total so a rebound of the same strength will achieve less than a 15% increase — not to mention that even if the leveraged ETF rebounded 15%, its new $9.78 price would still fall short of where it started the previous day. For this reason, leveraged ETFs should be used only for short-term trades, not long-term investments.