This is a leveraged ETF designed to track three times the daily return of a US biotech index. It uses derivatives to reflect short-term moves in the biotech sector at an amplified magnitude, and its exposure is reset on a daily basis.

It suits active traders who want to make a leveraged bet on the short-term direction of the biotech sector and investors willing to tolerate high risk.

It is a passive (index-tracking) ETF managed by Direxion.

The fund builds its exposure with derivatives to track three times the daily return of a US biotech index, and it resets its leveraged exposure every day. Because of this daily reset structure, a prolonged period of high volatility creates a compounding effect, causing cumulative returns to differ significantly from a simple three times the index return.

• 3x daily leverage on a biotech index
• Leverage structure reset every day

Assets under management (AUM) stand at $586.3M, and the expense ratio is 0.96% per year.

Compared with XBI, which invests in biotech without leverage, the leverage multiple and volatility are the main points of comparison.

Because leveraged sector products amplify index moves, they typically deliver large gains in rising markets and large losses in falling markets. Biotech is sensitive to clinical trial results, regulation and interest rates and is highly volatile, so the leverage effect can be even more pronounced.

Fund flows into leveraged products diverge sharply depending on demand for short-term directional bets, and short-term trading money sometimes flows in when biotech momentum strengthens. It is also worth noting that performance can vary widely depending on the volatility environment.

The potential for short-term leveraged gains is both its strength and its risk, and the compounding effect of the daily reset and the high volatility inherent in biotech are considerations.

For biotech exposure without leverage, direct substitutes include XBI, and for broader biotech and pharmaceutical exposure, products such as IBB are also worth comparing. To bet on a biotech decline, you can also consider inverse leveraged products such as LABD. The three products shown in the table, SOXL, TQQQ and SSO, track semiconductors, the Nasdaq and the S&P 500 with leverage, so their underlying indexes differ. This ETF's differentiating factor is its leveraged structure that tracks three times the daily return of a biotech index.

These are the points to review before investing in LABU. Short-term leveraged gains are attractive, but amplified losses, the compounding effect and unsuitability for the long term should be confirmed in advance. It is best to approach the fund only after fully understanding its leverage structure.

Amplified losses when the index falls and the compounding effect of the daily reset are the main variables for performance, and biotech is highly volatile because it is sensitive to clinical results and regulation. Leveraged products are not suitable for long-term holding and carry a high risk of principal loss.

It is a suitable candidate for risk-tolerant traders who want to make a leveraged bet on the short-term direction of the biotech sector. If you want to invest without leverage, consider a product such as XBI, and if you want a short-term leveraged bet, it is advisable to choose this product only after fully understanding its structure.