How does the TMF ETF work?

The TMF ETF, or Direxion Daily 20+ Year Treasury Bull 3X Shares, is a leveraged ETF that provides 3 times the daily exposure to the ICE U.S. Treasury 20+ Year Bond Index. Here's how it works: 1. **Benchmark and Objective**: TMF tracks the ICE U.S. Treasury 20+ Year Bond Index closely. This index consists of publicly issued U.S. Treasury securities with maturities greater than 20 years. TMF aims to deliver 3 times the daily performance of this index. 2. **Leverage Mechanism**: To achieve 3 times the daily performance, TMF employs derivatives like futures and swaps. This daily leverage resets the exposure of the ETF, meaning that the leverage does not compound over longer periods. However, this leverage comes with additional risk factors, including significant leverage and daily compounding, which can lead to amplified losses as well as gains. 3. **Investment Strategy**: TMF is designed for investors with a bullish outlook on long-term U.S. Treasuries and is best suited for short-term trading rather than long-term holding. The ETF is intended for investors who are comfortable with the high risk associated with leveraged exposure. 4. **Expense Ratio and Leverage Ratio**: TMF has an expense ratio of 0.91% and a leverage ratio of 3, which means that for every dollar invested, the ETF aims to gain 3% in daily returns based on the performance of the underlying index. 5. **Dividend Policy**: TMF does pay dividends, although the compounding effects of leverage can impact long-term performance. Due to the leveraged structure, TMF may not be suitable for investors looking for stable, long-term income. In summary, TMF is a leveraged ETF that provides amplified exposure to the ICE U.S. Treasury 20+ Year Bond Index on a daily basis. Its leverage mechanism, while attractive for short-term traders seeking high returns, also introduces significant risk due to the daily compounding of leverage and the potential for substantial losses as well as gains.