Reader851

Understanding Triple Leveraged ETFs

Ron Rowland, your logic is wrong. In your example, the value of your investment has increased from $1 to $2. Thus, your current investment, now $2, is levered at 3x, not 6x. You're ignoring the changing value of your investment when calculating leverage. You're erroneously remaining focused on the original cost of the investment.

The original investment cost is irrelevant, in terms of calculating leverage. That's why brokerages keep changing borrowing power in margined accounts. They base borrowing power -- leverage -- on the current value, not the original value, of the investment. Better try again.