Derivative?????????

1. A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset.  2. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

3. Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Derivatives are contracts and can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days source investopedia

What Is an ETF?

1. An ETF is a portfolio of stocks, bonds or other investment class that trades on a stock exchange, much like a regular stock does. ETFs are essentially index funds in that they track the performance of a specific index or asset. 

2. Leveraged ETFs attempt to track the index with borrowed capital in order to increase investment exposure. The fund will typically be levered by a factor of two or three for every dollar of investor capital. However, it is important to note that these levered ETFs attempt to mirror the daily rate of change for an index. They then reset each night and attempt to repeat this feat each day. For instance, if the Russell 2000 trades up 1% for the day, the 2x tracking ETF will attempt to match that with a factor of two, or 2%. The 3x version would follow at 3%. The farther out in time you go, the less correlated the returns will be.

3. However, with the additional leverage comes additional risk. If traders are not careful, they could find themselves in a world of pain. A common mistake with some traders is trading a leveraged ETF withmargin. This can exacerbate what is already a volatile trading vehicle into a surefire margin call.