The gift and curse of leveraged ETFs

Video Description

Listen and subscribe to Stocks In Translation on Apple Podcasts, Spotify, or wherever you find your favorite podcast. You don’t have to be a rocket scientist to invest, but you do need to stay sharp. Investing can be risky, especially with complex financial products like options trading and leveraged ETFs. In this episode of Stocks in Translation, Todd Sohn, ETF Strategist at Strategas Asset Management, joins Markets and Data Editor Jared Blikre and Senior Reporter Alexandra Canal above the trading floor of the New York Stock Exchange. Our focus is on leveraged ETFs, which is also our word of the day. Blikre explains that a leveraged ETF “uses derivatives or debt to amplify returns, aiming to deliver two… or three times the daily performance of an index.” While leveraged ETFs can magnify gains, they also increase potential losses. “They can be riskier than traditional ETFs,” warns Blikre. Sohn illustrates this hazard with a real-world example: Nvidia’s (NVDA) 17% drop following DeepSeek AI’s advancements. “If you're holding a 2X leveraged Nvidia ETF, and the stock drops 17%, that ETF could plunge 34%,” he explains. And with a 3X leveraged ETF? You’re looking at a 54% loss. “This is where risk becomes real,” Sohn adds. “You need to fully understand what you're doing when dealing with leveraged ETFs.” Stocks may carry the same risks they did years ago, but “access to risk is far more convenient,” says Sohn. “Now, if I have a brokerage account, I can go lever up and buy 2X Nvidia, 2X whatever I want now… It was not like that 30 years ago…You had to be a high net worth individual or institutional investor to access these types of products,” notes Sohn. Twice a week, Stocks In Translation cuts through the market mayhem, noisy numbers and hyperbole to give you the information you need to make the right trade for your portfolio. You can find more episodes here, or watch on your favorite streaming service. This article was written by John Tejada. #etfs #stocks #stockmarket About Yahoo Finance: Yahoo Finance provides free stock ticker data, up-to-date news, portfolio management resources, comprehensive market data, advanced tools, and more information to help you manage your financial life. - Get the latest news and data at finance.yahoo.com - Download the Yahoo Finance app on Apple (https://apple.co/3Rten0R) or Android (https://bit.ly/3t8UnXO) - Follow Yahoo Finance on social: X: http://twitter.com/YahooFinance Instagram: https://www.instagram.com/yahoofinance/?hl=en TikTok: https://www.tiktok.com/@yahoofinance?lang=en Facebook: https://www.facebook.com/yahoofinance/ LinkedIn: https://www.linkedin.com/company/yahoo-finance