This product offers leveraged exposure to silver futures, making it potentially useful for those looking to bet heavily on a short-term movement in the price of the precious metal. Given the leverage utilized, USLV can be expected to exhibit a fair amount of volatility; this ETN is designed for investors who are both risk-tolerant and sophisticated; it has no place in a long-term, buy-and-hold portfolio, and should only be used by those with the ability to monitor the position closely.

This product offers leveraged exposure to silver futures, making it potentially useful for those looking to bet heavily on a short-term movement in the price of the precious metal. Given the leverage utilized, USLV can be expected to exhibit a fair amount of volatility; this ETN is designed for investors who are both risk-tolerant and sophisticated; it has no place in a long-term, buy-and-hold portfolio, and should only be used by those with the ability to monitor the position closely.

There are several elements of USLV that are noteworthy. First, it’s important to understand that the product offers exposure not to spot silver prices but to an index comprised of silver futures contracts. So the slope of the futures curve will have an impact on bottom line returns, as will yields derived from any uninvested cash. Second, be aware that USLV’s exposure resets on a daily basis, meaning that performance over multiple trading sessions depends on the path taken by the index over that periods (daily compounding can either erode or enhance returns, depending on the environment). Third, investors should note that USLV is an ETN, meaning that they are exposed to the credit risk of the issuing institution. There are, however, plenty of advantages to pursuing this strategy through the ETN structure. Tracking error, which can become significant in futures-based and 3x leveraged strategies, is avoided entirely. And investors won’t get a K-1 after holding this product; futures-based commodity ETFs, such as the leveraged silver products from ProShares, typically generate those tax obligations, and can result in undesirable tax obligations as well.

For investors seeking plain vanilla silver exposure, SIVR or SLV are both good options; those physically-backed products move in unison with changes in the spot price of the metal. USLV can be a very powerful tool if used correctly, but if you’re not familiar with the nuances of leverage and futures-based strategies, it’s best to stay away or stick to non-leveraged options.