Summary Table

The Fund seeks daily leveraged investment results and is very different from most other exchange-traded funds. The fund is an exchange traded fund that seeks daily levered investment results, before fees and expenses, of two times (200%) of the daily percentage change in the price of the common stock of ARM.

Design and Underlying Asset

ARMG aims to provide daily investment results, before fees and expenses, that correspond to 200% of the daily performance of Arm Holdings plc (NASDAQ: ARM), a leading designer of semiconductor intellectual property and processor architectures. Unlike ETFs that track a broad index, ARMG focuses solely on a single underlying security — ARM stock.

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

ARMG is structured as an open-ended fund and trades on an exchange like a typical stock. It offers investors capped losses limited to their invested amount, eliminating the risk of margin calls typically associated with direct leverage

Risk and Return Characteristics

As a 2x leveraged ETF focused on a single stock, ARMG carries a high-risk profile. Its objective is to magnify the daily price movements of Arm Holdings plc (NASDAQ: ARM) by 200%. This means that both gains and losses are amplified daily. For example, a 1% daily increase in ARM’s stock price would aim to result in a 2% gain in ARMG, while a 1% decline would translate to a 2% loss.

Underlying risks for ARMG:

• Compounding and Volatility Risk: Due to daily rebalancing, ARMG’s performance over multiple days is affected by compounding, which can cause returns to deviate from the expected 2x multiple of Arm Holdings plc (NASDAQ: ARM) cumulative return. This effect is more pronounced in volatile markets and over longer holding periods.
• Market Risk: ARMG is exposed to the price fluctuations of ARM stock, which can be influenced by company-specific events, industry trends, and broader market conditions.
• Leverage Risk: The 2x leverage amplifies losses, and a decline of more than 50% in ARM’s stock price in a single day could result in a total loss of invested capital.
• Counterparty and Synthetic Replication Risks: The fund’s use of swap agreements introduces counterparty risk, which is the risk that the other party in the swap may fail to meet its obligations.
• Intra-Day and Rebalancing Risks: Market disruptions or significant price swings during the trading day can impact the fund’s ability to maintain its targeted leverage and correlation with ARM.
• Expense Ratio: ARMG has an expense ratio of approximately 0.75%, which affects net returns.

Because of these risks, ARMG is intended as a short-term tactical investment tool rather than a long-term buy-and-hold vehicle. The fund may lose money over time even if ARM’s stock price rises, especially in volatile or sideways markets.

Suitability for Traders and Investors

ARMG is designed for investors seeking leveraged exposure to the daily price movements of Arm Holdings plc (NASDAQ: ARM) and who understand the complexities and risks associated with leveraged ETFs. It may be appropriate for:

• Short-Term Traders: Investors aiming to capitalize on daily price movements in ARM stock might use ARMG as a tactical tool.
• Experienced Investors: Those knowledgeable about leverage, synthetic replication, and the risks of daily reset ETFs.
• Sector or Stock Specialists: Investors with strong confidence in ARM’s near-term stock performance.

ARMG is generally not suitable for long-term investors or those seeking stable, consistent returns because of leverage decay and compounding.

Technical Summary

Conclusion

The Leverage Shares 2X Long ARM Daily ETF (ARMG) provides investors with twice the daily exposure to Arm Holdings’ stock price through a leveraged, synthetic structure. Its design aims to amplify daily returns but carries significant risks, including leverage decay, compounding effects, and counterparty risk.

ARMG is best suited for experienced, short-term traders or investors with a strong conviction in ARM’s daily price movements 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 time.

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