Depending on when the fund is purchased during the month, the intra-month purchase will have a higher or lower exposure level according to the type of fund, and exposure will remain constant through the rest of the month, or until the position is sold.
If an investor decides to hold the fund through the end of the month, however, there will be a rebalancing. Exposure will be reset to 200% or -200% on the last day. Accordingly, gains will be added to the original principal and risk will be higher, or losses will be taken from the original principal and risk reduced.
For more information on leveraged and inverse funds, visit our long-short category. Read our special report on leveraged and inverse ETFs here.
Max Chen contributed to this article.