Short and Leveraged ETP FAQs


ETP stands for Exchange Traded Product and is an umbrella term which encompasses Exchange Traded Funds (ETFs), Exchange Traded Notes (ETNs) and Exchange Traded Commodities (ETCs). ETPs can provide exposure to all asset classes including:

  • Equities
  • Commodities
  • Fixed income
  • Currencies
  • Alternatives
Short and Leverage ETPs are exchange traded investment products, which enable you to take Long (rising markets), or Short (falling markets) exposure to an index like the FTSE 100 Index, a commodity like gold or oil, a currency pair like GBP / USD or a Fixed Income security like Gilts.

However, instead of moving in line with your chosen underlying asset, a Short and Leverage ETP will leverage your exposure by 2, 3 or 5 times, and multiply any gain or loss by that amount.

One critical difference with other leverage products like CFDs or Spread Bets is that you can never lose more than you invest with Short & Leverage ETPs. Also, In order to mitigate against the risk of the Short & Leverage ETP provider defaulting or becoming insolvent, Short & Leverage ETPs are backed by collateral assets.

Importantly, Short and Leverage ETPs are designed around the daily performance of the underlying asset. If you are holding a Short and Leverage ETP for more than a day, the return you receive will not be a precise multiplication of the underlying asset performance. This is because profits and losses are compounded each day. 

Leverage a potential daily rise or fall by 2, 3 or 5 times

Equities, commodities, currencies or fixed income

Real time, intraday price transparency on the LSE

Counterparty risk mitigation feature

Impossible to lose more than you invest
  S&L ETPs  CFD Spread Bet
Classification Security OTC derivative OTC derivative
Regulated Prospectus directive/listed No specific framework No specific framework
Liquidity Governed by the Exchange  Dependant on CFD provider Dependant on SB provider
Market Makers Multiple CFD provider only SB provider only
Pricing On Exchange price transparency   Via CFD provider Via SB provider
Margin Calls No Yes Yes
Knock outs No Yes at position and account level Yes at position and account level
Lose more than your initial investment    No Yes Yes
Trading Exchange, stockbroker dealing account, SIPP or ISA    Provider specific account Provider specific account
Leverage Factors x1, x2, x3 & 5x Based on margin requirement Based on margin requirement
Counterparty risk Mitigated by collateral Against CFD provider no mitigation Against SB provider no mitigation
Trade order types Same as an equity More limited than equity More limited than equity
Tax treatment* CGT – no stamp CGT – no stamp No tax

 Source: Boost ETP, A WisdomTree Company

Investors who are not familiar with CFDs and Spread bets should do their own research to fully understand what they are, and how they work.

* Any statement in relation to tax, where made, is generic and non-exhaustive and is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and practice and the interpretation and application thereof, which changes could be made with retroactive effect. Any such statement must not be construed as tax advice and must not be relied upon. The tax treatment of investments will, inter alia, depend on an individual’s circumstances. Investors must consult with an appropriate professional tax adviser to ascertain for themselves the taxation consequences of acquiring, holding and/or disposing of any investments mentioned in this document.

  S&L ETPs Futures Swaps
Ease of Use Yes Limited Limited
Instrument Type Security Listed derivative OTC derivative
Range or Underlying's Very broad Major only Very broad
Regulated Prospectus directive / listed Listed No specific framework
Documentation Equity account Futures & margin account Complex legal arrangements with associated costs - ISDA, CSA & ATS
Liquidity Very liquid from underlying (open ended) Many are liquid. Some not Liquid as underlying but depends on swap counterpart
Time Horizon Flexible Flexible Fixed - depends on swap terms
Multiple Market Makers Yes Yes No - swap provider only
Arbitrage Yes Yes No
Exchange Listed Yes Yes No
Settlement & CCP Yes (Crest) Yes OTC
Investor Base Broad Narrow Narrow
Secondary Market Yes Yes No
Counterparty Risk Limited (collateral) CCP risk collateral not 100% Full risk to swap provider
Leverage x1, x2 & x3 Based on margin requirement Yes - based on collateral required
Variation Margin No Yes – daily Yes
Short Exposure Yes Yes Yes
Interest Rate and Dividend Risk N/A Yes – E.G. US dividends accelerated due to Fiscal cliff. Futures use implied dividends Yes (limited)
Dividend Risk N/A Yes – forward dividend implied in basis N/A
Roll Costs / Risk No Yes – frequency depends on contract. Can be adversely affected by demand at the roll leading to price dislocations N/A
High Contract Values No – 1 share Yes – FTSE 100 = £60,000 approximately Yes - depends on swap provider
Lose More Than Your Investment No Yes Yes
Segregated Accounts Yes Not all (MF Global & Refco) N/A
Volatility High due to leverage Very high due to highest leverage N/A
Order Types Multiple same as equities e.g. stop/orders Yes – limited N/A
Collateral Hypothecation No Yes Yes
  • Eligible counter parties, financial advisers and money managers.
  • Active investors who have the capability to monitor their positions daily or regularly.
  • Investors who are experienced in trading ETPs or similar risk profiles.
  • Investors who can afford to lose all their investment.
  • Investors who understand leverage and compounded returns.
  • Unsophisticated investors. For example, general retail investors.
  • Inactive investors who cannot monitor investments daily or regularly.
  • Investors who do not have experience in trading ETPs or leveraged products.
  • Investors who can’t afford significant losses.
  • Investors who don’t understand leveraged and compounded returns.
  • Leveraged ETPs return, for example 2x, 3x or 5x, the daily % change of the underlying asset (ignoring fees and adjustments)
  • They either:-
    • track a specially designed leveraged index that calculates the daily return; or
    • they track a unleveraged index and provide ​leveraged or short the daily change through application of a formula similar to that used by a short or leveraged index
    • the economic effect of both index methods are the same
  • the total losses can be no more than the initial investment, you cannot have a negative value
  • many short and leveraged ETPs have an intra-day rebalancing mechanism if the ETP falls by more than a certain amount in any one day (e.g. a fall of 45% to 60%), which helps to soften any further falls in ETP price and prevent the ETP from becoming valueless

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Important Notice

This website is not directed at Retail Investors in the European Economic Area. This website is directed only at Professional Clients and Eligible Counterparties (as defined in the glossary of the FCA Handbook).

This website is published and maintainted by Boost ETP, A WisdomTree Company, which is a limited liability partnership and is incorporated in England and Wales with registered office at WisdomTree Europe Ltd (registered number 08985846) 20-22 Bedford Row, London WC1R 4JS, United Kingdom. Boost ETP, A WisdomTree Company is an appointed representative of Mirabella Financial Services LLP which is authorised and regulated by the Financial Conduct Authority.

This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.

Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.

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Certain documents made available on the website have been prepared and issued by persons other than Boost ETP, A WisdomTree Company. This includes any Prospectus. Boost ETP, A WisdomTree Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Boost ETP, A WisdomTree Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes any warranty as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.

Risk Warnings

You should always bear in mind that;

  • The investment performance of any security referred to on this website can be volatile and can go up or down and you can lose your entire investment.
  • Past performance is not an indication of future performance.
  • Rates of exchange may affect the value of investments.
  • Applications to invest in securities referred to on this website must only be made on the basis of the relevant Prospectus.

Short and Leverage Investment

Certain of the ETP Securities provide a short or leveraged exposure and are only suitable for professional investors with knowledge of the risks and benefits of both short and leveraged investment strategies.

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