5QQQ Quote - Leverage Shares 5x Long US Tech 100 ETP Securities Fund - Bloomberg (2024)

FAQs

What is 5QQQ? ›

5QQQ: Leverage Shares 5x Long US Tech 100 ETP Securities | FT.

The Leverage Shares 5x Long US Tech 100 ETP Securities is designed to provide 5x the daily return of Invesco QQQ Trust (QQQ) stock, adjusted to reflect the fees and costs of maintaining a leveraged position in the stock.

A 1-for-5 reverse stock split is to blame for the SQQQ ETF's seemingly high returns.

Nearly all leveraged ETFs come with a prominent warning in their prospectus: they are not designed for long-term holding. The combination of leverage, market volatility, and an unfavorable sequence of returns can lead to disastrous outcomes.

For instance, with a 5x leverage, you can purchase 5 times more shares. And if the market moves in your favour, you stand to gain 5 times more return on your investment.

The largest Leveraged ETF is the ProShares UltraPro QQQ TQQQ with $22.48B in assets. In the last trailing year, the best-performing Leveraged ETF was CONL at 726.38%. The most recent ETF launched in the Leveraged space was the ProShares Ultra Ether ETF ETHT on 06/07/24.

5x leverage can be risky for both beginners and experienced traders, albeit in different ways. For experienced traders, it's relatively safer due to their familiarity with market dynamics and risk management strategies.

Volatility of Leveraged ETF

Another leveraged ETF risk is the leveraged ETF volatility. Maintaining a constant leverage ratio that is probably two or three times the usual amount is typically hard. The price of the underlying index fluctuates, changing the leveraged funds' assets value, depicting high volatility.

Because they rebalance daily, leveraged ETFs usually never lose all of their value. They can, however, fall toward zero over time. If a leveraged ETF approaches zero, its manager typically liquidates its assets and pays out all remaining holders in cash.

While the Fund has a daily investment objective, you may hold Fund shares for longer than one day if you believe it is consistent with your goals and risk tolerance. For any holding period other than a day, your return may be higher or lower than the Daily Target.

Does SQQQ decay over time? ›

The SQQQ is meant to be held intraday and is not a long-term investment, where expenses and decay will quickly eat into returns.

Since SQQQ's leverage resets on a daily basis, holding the fund beyond a single day may compound returns and provide results that are different from the target return.

Since they maintain a fixed level of leverage, 3x ETFs eventually face complete collapse if the underlying index declines more than 33% on a single day. Even if none of these potential disasters occur, 3x ETFs have high fees that add up to significant losses in the long run.

In a typical leveraged ETF, your risk is limited to your principal (what you invested plus gains/losses.) So a fund can go to zero in which case you lose your entire investment, whether you may loose more than that is another question and depends on your fund. You will need to read the prospectus to figure this out.

BMO has launched the first quadruple leveraged ETN fund that tracks the S&P 500. The fund will trade under the ticker symbol "XXXX" and seeks to generate four time the S&P 500's return on a daily basis. The launch come as bullishness rise among investors and Wall Street predicts more gains to come in 2024.

QQQ is perhaps best suited as a long-term investment for those who want broad exposure to the Nasdaq-100 Index. TQQQ is built for short-holding periods and is best suited for day traders.

The CFD trader has a choice of leverage available to them and opts for leverage x5. This means their margin for the trade is just one fifth of the total exposure. The total exposure is $12,000 and their margin is, therefore, $2,400 (12,000 ÷ 5 = $2,400).

In the USA, the popular QQQ ETF, which tracks the Nasdaq 100, has been available since 1999. It is managed by Invesco. The European counterpart of this ETF uses the ticker symbol eQQQ. In contrast to the US market, however, there are several ETF providers in Europe that track the Nasdaq 100 – so it is worth comparing.