A leveraged ETF is an exchange-traded fund that uses debtor derivatives as leverage to amplify the returns of a benchmark index. Leveraged ETFs can produce significant short-term gains/losses, such as 2x or even 3x the daily performance of the underlying benchmark index. For example, a 2x leveraged ETF on S&P 500 index, can have 2x the daily performance of S&P 500 index. I.e., if S&P 500 index gains 1% in one day, then the 2x leveraged ETF will gain 2%; similarly, if the S&P 500 index loses 1% in one day, then the 2x leverage ETF will lose 2%. One commonly used financial derivative to create leveraged ETFs is TRS. 

Would you please design a 2x leveraged ETF on the S&P 500 index with TRS? 

Assume you can easily find a counterparty and feel free to use any benchmark rate or any other necessary assumptions when needed. Also, in your design as long as the performance is roughly 2x it is okay, no need to be exactly 2x.

Answer rating: 100% (QA)

Designing a 2x leveraged ETF on the SP 500 index using Total Return Swaps TRS involves creating a structure that aims to achieve approximately 2x the ... View the full answer