ProShares Ultra Communication Services (LTL)

ProShares Ultra Communication Services is a bet with a twist. It is not a normal fund that buys stocks and holds them. Instead, it uses borrowed money and derivatives to aim for twice the daily return of the Communication Services sector. When that sector rises 1%, this fund tries to rise 2%. When it falls 1%, it falls 2%. This magnification is powerful when you are right and destructive when you are wrong.

How the leverage works and why it resets daily

The fund does not simply buy double the amount of Communication Services stocks. Instead, it borrows money and uses derivatives like futures and swaps to amplify exposure. That borrowing costs money. The derivatives reset every single day. If the sector goes up 10% over a month and then down 10%, you do not end up back where you started. The daily rebalancing locks in losses on the down days and gains on the up days, which sounds good until you work through the math.

Here is the trap. Imagine the Communication Services index starts at 100. It rises 10% to 110, then falls 10% back to 99. The normal index is slightly down. An investor in LTL would have gained 20% on the way up (twice the 10%), then lost 20% on the way down (twice the 10%). Twenty percent off 120 is not a round number — you end up with something less than where you started. The daily resets compound against you in sideways markets.

What Communication Services means

This fund is betting on the companies that run the infrastructure and content that connect people: broadcast and cable television, streaming services, wireless and wireline telecom networks, social media, digital publishing, and advertising platforms. Think Disney, Netflix, Meta, Charter Communications, Comcast, Verizon, AT&T, and the like. These are the companies that own the pipes and the content flowing through them.

The sector has been volatile. Streaming has disrupted legacy television. Cord-cutting has pressured cable and broadcast. Advertising has consolidated at Google and Meta. Wireless competition keeps pricing competitive. A leveraged bet on this sector goes up fast when investors favor it and down fast when they do not.

Why investors use or avoid leveraged ETFs

People buy LTL for two reasons. Some believe the Communication Services sector is about to rise sharply and want amplified upside. Others are using it as a hedge or a tactical short-term trade. Nobody should hold it passively for years. The structure works against you in flat or choppy markets. If you buy at the top and hold through a drawdown, the daily resets gnaw at you. Tax drag also accumulates because trading in and out of derivatives triggers taxable events.

The leverage itself is borrowed money. When leverage costs 3% a year and you earn 5% in gains, the net is only 2%. In a sideways market with zero gains, you lose purely to the cost of borrowing.

The risks are simple and serious

If the Communication Services sector crashes 50%, LTL crashes 100%. You lose everything. Even if you believe in the sector, a 30% drop means a 60% hit to this fund. That is not hypothetical. Broad market corrections of 20% are normal every few years. A leveraged sector bet through that kind of move is genuinely painful.

Volatility itself becomes an enemy. A sector that bounces up and down 5% most days, but ends the year flat, will drag this fund down purely through the mathematical impact of daily resets. The bigger the swings, the worse the drag.

Who should and should not own this

Professional traders and active hedge-fund managers use leveraged ETFs as tools for specific tactical bets lasting days or weeks. They understand the daily-reset mechanics and trade accordingly. Retail investors buying and holding LTL for months or years are usually disappointed. The fund is also inappropriate for retirement accounts or any long-term portfolio construction.

It makes sense only if you meet three criteria: you believe the Communication Services sector will rise over the next few days or weeks (not years), you can tolerate 100% loss of your position, and you know how to exit when the thesis changes. Otherwise, a normal Communication Services index ETF or a diversified equity fund is simpler and more reliable.

Checking your conviction

If you are considering LTL, ask yourself one question honestly: am I willing to check my position daily and exit when it hits -25% or -30%, or when my time horizon expires? If the answer is no, do not buy it. The fund is a tool. Like all tools, it gets misused when someone treats a hammer as a microscope.

The prospectus lays out exactly what it promises: twice the daily return of the Communication Services sector, using leverage and derivatives. That is not hype or approximation — it is what you get, with the tax and expense consequences that leverage entails. Understand that deal before committing capital.