A fund that holds a basket of assets and trades on an exchange like a stock, tracking an index, sector, commodity, or strategy.
ETFs let you trade an entire index or sector in one line. Leveraged and inverse ETFs reset daily and decay in choppy markets; commodity ETFs holding futures suffer from contango roll costs. Read what the ETF actually holds.
Liquid ETFs have tight spreads and deep options markets, which makes them common vehicles for hedges and zero-dte trading.
Example: a 3x leveraged ETF on an index that goes up 10% then down 10% (net -1%) will be down about 9% because of daily compounding, not 3%.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Contango and backwardation. A futures curve shows what buyers will pay for delivery in one month, two months and so on. When later contracts cost more than the spot price the curve is in contango; when they cost less it is in backwardation.
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