A new ETF is a long-term leveraged bet on the popular stock index Wall Street has continued to blur the lines between investing and gambling with one recently launched exchange-traded fund. Earlier this month, Roundhill Investments launched the Roundhill S&P 500 Target 10,000 2030 ETF . The ETF essentially offers investors the chance to take a long-term leveraged bet that the S&P 500 will continue to climb.
Options contracts held by the fund may deliver a substantial payout if the S&P 500 is trading above 10,000 on Jan. 10, 2030, when the contracts expire. If the index falls short, then the contracts will expire worthless. Although the outcome for the options is binary, investors don’t necessarily need to hold the fund until the contracts expire.
Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it. I would like to receive updates and special offers from Dow Jones and affiliates. I can unsubscribe at any time.
ETFs that use derivatives like options to offer investors leveraged exposure to a given index, stock or asset have proliferated in recent years. But, as Roundhill CEO Dave Mazza pointed out, most of these products have catered to day traders, by employing leverage that resets daily. Unlike the hundreds of leveraged and inverse ETFs that came before it, the new Roundhill ETF is designed as a long-term leveraged play on the direction of the S&P 500.
With the S&P 500 notching a new record high earlier this week after three straight years of double-digit gains, a target of just above 10,000 probably appears within reach to many. Achieving the target would require a compound annual growth rate of about 8%, according to MarketWatch calculations. That’s slightly higher than the long-term average: Going back to 1928, the S&P 500 has delivered a compounded price return of 6.4%, excluding dividends, Dow Jones Market Data showed.
Like prediction markets, the fund offers investors the chance to take a “binary bet” on a predetermined outcome, said Dave Nadig, president and director of research at ETF.com, in an interview. That’s where the gambling aspect comes into play, he noted. But because the leverage is long term and the product is packaged in an ETF, it might seem less risky to potential buyers.
Extract — continue reading at the source.
