Leveraged ETF: why double does not mean twice the return

A leveraged ETF aims to multiply the movement of an index on a single day, so with 2x it doubles it. Over several days, this does not produce double the total movement. If the index is back at its starting value after two days, a 2x product in the example ends below it. The reason is called path dependency: the path matters, not just the start and the end.

Leveraged ETF: how does daily resetting work?

Most leveraged and inverse products reset their leverage factors every day. The target applies for one trading day only. After each trading day, the product is readjusted to the factor, calculated from the new value. It can be compared to a game in which the score becomes the new starting point every evening.

The leverage therefore acts on each day separately. The daily results are then compounded one after another, each on the value of the previous day.

Numerical example: index 100, then 90, then back to 100

The calculation for the 2x product: 100 times 0.80 times 1.2222 gives 97.78. On the first day, the product falls twice as much as the index, to 80. On the second day, the recovery doubles to +22.22%, but it builds on the lower value of 80. As a result, a little over 2 points are missing. For the 3x product the gap is larger, because leverage amplifies this effect.

The effect appears even without leverage. Percentages always refer to the current value, so a gain of 10% does not offset a loss of 10%. How percentage calculations work over several periods is shown in the article Calculating returns: how much is left after inflation?.

FINRA works through a similar example: a 2x product starts at USD 100, and the index loses 10% and then gains 10%. The product then stands at 80 and then at 96, which is −4%. The index stands at 99, which is −1%.

Why the path matters

Path dependency means that the end value depends on the order and size of the daily steps, not just on the index's starting and ending levels. The inverse product shows this as well. It gains 10% on the first day and loses 11.11% on the second. It ends at 97.78 although the index is back at 100.

Two further calculation examples (illustration, freely chosen values, before costs and taxes):

The effect does not only work against the product. If the index rises by 10% on each of two days, it stands at 121 (+21%). The 2x product grows by 20% twice, to 144 (+44%). Double the index return would be +42%, so here the product ends above it.

If the index falls by 10% on each of two days to 81 (−19%), the 2x product ends at 64 (−36%). Double the index loss would be −38%, so here the product loses less. The result depends on the path, not only on whether the index gains or loses.

What applies in Switzerland?

Leveraged products can be traded on the SIX Swiss Exchange. On 25 November 2025, SIX announced the listing of ETPs with the factors 3x long (follows the underlying) and −3x short (moves in the opposite direction) on Bitcoin and Ethereum. According to the announcement, they are aimed at experienced investors who are familiar with leverage and daily rebalancing. Date of the SIX information: retrieved on 11 November 2026.

On the legal form, SIX writes: ETPs are collateralised, non-interest-bearing bearer debt securities. Collateralised means that collateral is held for the payments. A debt security is a security with which the issuer promises payments to the holders.

According to SIX, ETPs are not subject to the Collective Investment Schemes Act, the Swiss law for funds. The Swiss Financial Market Supervisory Authority (FINMA, the Swiss supervisory authority for banks, insurers and financial markets) therefore does not supervise them. ETPs can track the underlying, that is, the index or value they follow, unchanged or with leverage. An ETF in the narrower sense, by contrast, is a fund. Where to find costs and risk information for a product is shown in the article How to read a factsheet: items, identifiers and charts explained.

Risks and limits

• Losses in both directions: Leverage amplifies gains and losses. Leveraged products can lose a lot of value. This also applies to inverse products.
• Deviation over longer holding periods: According to FINRA, performance over holding periods longer than the daily target can differ significantly from the daily target. Losses are also possible over longer periods when the index rises. Higher leverage and stronger fluctuations increase the deviation.
• Costs: The calculation above contains no costs or taxes. In practice they are added and reduce the result. Specific figures are in the documents of the individual product.
• Fluctuation of the underlying: Bitcoin and Ethereum can fluctuate sharply. With leverage, this has an amplified effect on the product.
• Currency risk: The crypto ETPs in the SIX announcement are traded in USD and EUR. Those who calculate in another currency also bear exchange rate fluctuations.
• Issuer risk: ETPs on SIX are debt securities. SIX describes ETPs as collateralised. Investors nevertheless depend on the issuer's ability to pay, and collateralisation does not protect against losses from the underlying.
• Simplified example: The values in the example and in the calculator are freely chosen. Real products can deviate from the factor. This is neither a forecast nor a recommendation.

Conclusion

A leveraged ETF targets a multiple of the daily return, and the target is reset every day. Over several days, the result depends on the path (path dependency). In the example, after −10% and +11.11% of the index, a 2x product ends at 97.78 and a 3x product at 93.33, in each case before costs and taxes. In a sustained trend, the product can also end above double the index return. ETPs on SIX are debt securities, and losses are possible in both directions.