Financial instruments such as ETF’s, ETN’s, and ETP’s are synthetic investing and trading derivatives that have only risen to public availability in the past decade or so. These collections of products provide retail investors exposure to previously-unavailable sectors and investing opportunities, such as commodities, leverage, volatility, short-selling, and more.

While they are not perfect, these products have utility, if used appropriately. For short-term exposure, the price decay is insignificant, so as long as your trend analysis is sound, the decay factor is negligible. This way, you can get in and out of positions, with or without leverage, as quickly as you wish, without having to commit to futures contracts or options strategies.

However, if you read the prospectus for most any ETF, ETN, and ETP, the text should read that the product is not suitable for long-term investment, or even overnight holding, and that it may suffer from price decay and may not closely follow the proposed index or spot price as intended. Additionally, these products warrant heightened investor caution because their prices are typically predicated on futures contract ‘rolls’ and thus contango, higher expense ratios compared to mutual funds, and price decay relative to spot prices, especially of leveraged funds.