This is a leveraged ETF designed to track three times the daily return of the Russell 2000, the US small-cap index. It uses derivatives to reflect short-term moves in the small-cap index at an amplified magnitude, and its exposure is reset on a daily basis.

It suits active traders who want to make leveraged bets on the short-term direction of small caps and who can tolerate very high risk.

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

The fund builds its exposure with derivatives to track three times the daily return of the Russell 2000, the US small-cap index, and it resets its leverage exposure every day. Because of this daily reset structure, a prolonged period of high volatility produces a compounding effect, causing cumulative returns to differ significantly from a simple three times the index return.

• Daily three times leverage on the Russell 2000 small-cap index
• Leverage structure that resets every day

Assets under management (AUM) stand at $281.2M, and the total expense ratio (Expense Ratio) is 0.95% per year.

Compared with IWM, which invests in small caps without leverage, the main points of comparison are the leverage multiple and volatility.

Leveraged small-cap products reflect index moves in amplified form, so they typically deliver large gains in rising markets and large losses in falling markets. Small caps are sensitive to the economy, interest rates and risk appetite, so volatility is high and the leverage effect is correspondingly larger.

Fund flows into and out of leveraged products vary widely depending on demand for short-term directional bets, and short-term trading money sometimes flows in when small-cap momentum strengthens. It is also worth noting that performance varies greatly depending on the volatility environment.

The potential for short-term leveraged gains is both its strength and its risk, and considerations include the compounding effect of the daily reset, the high volatility characteristic of small caps, and its unsuitability for long-term holding.

For small-cap exposure without leverage, direct alternatives include IWM, and for another three times leveraged small-cap product, TNA is also worth comparing. For three times leveraged exposure to the S&P 500, products such as SPXL can also be considered. The three products shown in the table, TQQQ, SOXL and SSO, use leverage to track the Nasdaq, semiconductors and the S&P 500 respectively, so their underlying indexes differ. What sets this ETF apart is its leveraged structure that tracks the Russell 2000 small-cap index at three times the daily return.

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

Amplified losses when the small-cap index falls and the compounding effect of the daily reset are the main variables for performance, and small caps are volatile because they are sensitive to the economy and interest rates. 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 leveraged bets on the short-term direction of the small-cap index. For investing without leverage, consider products such as IWM, and for a short-term leveraged bet, it is advisable to choose this product only after fully understanding its structure.