ETFS 3x Daily Long FTSE 100 (UK3L) is designed to enable investors to gain a three times daily leveraged ‘long’ exposure to FTSE 100 Net of Tax (FTSE 100) by tracking the FTSE 100 Daily Super Leveraged RT TR Index (the “Index”). A three times daily leveraged long exposure means that the product is designed to reflect three times the daily percentage change in the FTSE 100 (the “benchmark”). For example, if the FTSE 100 was to rise in value by 5% on a particular day, the product would increase in value by 15% on that day
This word usually does not get support here
If the ftse goes down by 5% does that mean the etf goes down by 15%?
It does indeed. It makes returns - (or, yes, losses) - on the index tracker perform more like an equity. The FTSE simply doesn’t move in big leaps like that though, so if you know what you’re doing this is a really nice way to get good gains over short to mid term periods. I use it a fair bit in my HL account.
And what if there is a >33.3% drop in value? FTSE100 droped from 6,690 to 3,800 in 2008. Would you be required to cover the margin call or to be forced to sell for £0?
How about a 40% or a 50% fall?! Would that imply paying to sell?!
Edit: the above question it’s an absolute indicator of my complete ignorance on the matter. Gotta sort that out
I’m not sure you understand the product, so you’re probably best not investing in it. Read the literature a bit to get informed I’d suggest. It’s an ETF - so just like buying a stock. Gains, or losses, aren’t realised until you sell. There’s no “margin call” on it.
I thought the point of this channel was to request access to products that are not available today? Access to a product doesn’t mean you have to invest in it. Some people might want to though
Ha! I like your honesty The great thing about not knowing about something is we get an opportunity to learn eh?
The thing is any investment carries risk. It’s up to us to assess risk. If we don’t understand how something works it’s probably best avoiding it. I wouldn’t have touched anything related to CDOs in 2007, for example
My understanding: no margin calls but levered etfs are “magnifiers” - if the stock market goes down 100pts, this one goes down 300 (and similarly up).
Strong -1 from me - they’re not the right products for FT given FT’s intended market.
Thanks for your words.
I still gotta sort that specific out.
Allow me to try and guess: it’s an ETF, hence one can loose up to 100% of the allocation only?!
Yep Rod, that’s right. So I might be misunderstanding the point of Freetrade. It’s not just a platform for people make choices on, like any other ISA “container”? Ie if I want to invest in something and put it in my ISA, it doesn’t mean you have to, and vice versa?
Hi @Zxgh Mark
It is a platform but the company aims primarily to serve the large majority of people who aren’t currently investing or “I have a pension but dunno what’s in it”, that group much more than smart, adept, traders and investors (and I expect you’re one of those) who are fairly well served by the market already.
That emphasis means some financial products that could in theory be added to the platfom won’t be, on the grounds that to the average retail investor they’re more like gambling than investing. Eg CFDs, margin accounts etc.
And imho levered etfs. But I don’t work for FT, so don’t quote me on that, maybe @alex.s will be along to correct me where needed
This has been an interesting debate! There is a case to be made in favour of leveraged ETFs in certain situations of course. However, here’s Freetrade’s position when it comes to leveraged ETFs.
As a general rule, we don’t think that margin / leverage exposure is suitable for our audience as we’re building a service for first time investors. We’ve explained this principle in more detail here -
The FCA also seems to consider these securities as unsuitable for less experienced investors. We’re not required to do an eligibility assessment in order to give investors access to stocks that’re traded on the ‘main market’ e.g. in the FTSE 250. But we would be required to do an assessment if we wanted to offer leveraged ETFs.
So at the moment, we have no plans to add this type of ETF to our stock universe.
Thanks Alex, and Rod. Yes, I see the mission now and understand. I think a leverage index tracker is a more complex product, by the very nature that it’s “geared”, so I wouldn’t recommend it to a beginner. But at the same time it’s also miles from CFDs, etc (which I’d agree with Rod on are more akin to gambling). I would put something like this ETF as a stepping stone - because at the end of the day it is still based on an index, which is far more “smoothed” than investing in equities. This platform offers investing in typical US equities, which I’d proffer carry far more risk to amateur investors than an index tracker.
So I understand the stance of Freetrade but at the same time encourage all readers of this thread to understand the difference between the underlining index being leveraged and a plain equity. If you don’t understand a company’s finances then buying an equity (like, for example, Netflix) is again no different to gambling.
If someone doesn’t know what are leveraged ETF’s and fancies buying them, watch this https://youtu.be/xZeDJ2bdBoE and do good to yourself.
The word I can think of is Cringe