Summary Table

The Fund seeks daily leveraged investment results and is very different from most other exchange-traded funds. The Fund invests at least 80% of its net assets (plus borrowings for investment purposes) in financial instruments with economic characteristics that provide 200% daily leveraged exposure to the price of ADBE.

Design and Underlying Asset

ADBG aims to deliver daily investment results, before fees and expenses, corresponding to 200% of the daily performance of Adobe Inc. (NASDAQ: ADBE), a leading software company specializing in creative, marketing, and document management solutions. Unlike ETFs that track broad indices, ADBG focuses solely on a single underlying security — ADBE stock.

The fund achieves its 2x leveraged exposure primarily through swap agreements and synthetic replication strategies. It rebalances daily to maintain the 2x leverage target, adjusting for ADBE’s price movements each trading day. Due to this daily reset, returns over periods longer than one day may significantly deviate from twice the cumulative return of ADBE stock, influenced by compounding effects and market volatility.

ADBG is structured as an open-ended fund and trades on an exchange like a typical stock. It caps investor losses at the amount invested, eliminating the risk of margin calls associated with direct leverage.

Risk and Return Characteristics

As a 2x leveraged ETF tied to a single stock, ADBG has a high-risk profile, magnifying the daily price movements of Adobe Inc. (NASDAQ: ADBE) by 200%. For example, a 1% daily increase in ADBE’s stock price targets a 2% gain in ADBG, while a 1% decline results in a 2% loss.

Underlying risks for ADBG:

• Compounding and Volatility Risk: Daily rebalancing causes performance over multiple days to deviate from the expected 2x multiple of ADBE’s cumulative return, especially in volatile markets or over longer periods.
• Market Risk: ADBG is exposed to ADBE’s price fluctuations, driven by company-specific events, software industry trends, and broader market conditions.
• Leverage Risk: The 2x leverage amplifies losses, and a single-day decline of more than 50% in ADBE’s stock price could result in a total loss of invested capital.
• Counterparty and Synthetic Replication Risks: The use of swap agreements introduces counterparty risk, where the swap counterparty may fail to meet its obligations.
• Intra-Day and Rebalancing Risks: Market disruptions that cause significant intra-day price swings can affect the fund’s ability to maintain its targeted leverage and correlation with ADBE.
• Expense Ratio: ADBG has an expense ratio of approximately 0.75%, which reduces net returns.

Given these risks, ADBG is intended as a short-term tactical investment tool, not a long-term buy-and-hold vehicle. The fund may lose value over time, even if ADBE’s stock price rises, particularly in volatile or sideways markets.

Suitability for Traders and Investors

ADBG is designed for investors seeking leveraged exposure to the daily price movements of Adobe Inc. (NASDAQ: ADBE) and who understand the complexities and risks of leveraged ETFs. It may be suitable for:

• Short-Term Traders: Those aiming to capitalize on daily price movements in ADBE stock.
• Experienced Investors: Individuals knowledgeable about leverage, synthetic replication, and daily reset ETF risks.
• Sector or Stock Specialists: Investors with strong confidence in ADBE’s near-term performance.

ADBG is generally not suitable for long-term investors or those seeking stable, consistent returns due to leverage decay and compounding effects.

Technical Summary

Conclusion

The Leverage Shares 2X Long ADBG Daily ETF (ADBG) offers investors twice the daily exposure to the stock price of its underlying security through a leveraged, synthetic structure. Its design seeks to amplify daily returns but carries significant risks, including leverage decay, compounding effects, and counterparty risk.

ADBG is best suited for experienced, short-term traders or investors with strong confidence in the daily price movements of the underlying stock who can actively monitor their holdings. It is not intended for long-term investment due to the potential for significant divergence from expected returns over extended periods.

Investors should carefully evaluate their risk tolerance and investment horizon before engaging with this leveraged single-stock ETF.