AOT Invest has launched its newest product for tech-forward traders and thrill-seeking ETF fans, the 2x Daily Software Platform ETF (NYSE:SOFL).
The fund seeks to achieve double the AOT VettaFi Software Platform Index‘s daily return, a metric that measures 50 of the leading performing companies of the rapidly changing software platform universe.
These entities construct, run, or rely on scalable software infrastructure that underpins everything from cloud computing and artificial intelligence to applications development and enterprise solutions.
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Index Deep Dive
In order to be included in the index, firms need to generate half or more of their revenue from software platforms or closely associated businesses. A proprietary methodology rates quality and industry linkage to prevent those closely associated with service delivery, middleware, or platform licensing from being excluded. The index rebalances each quarter to maintain alignment with sector momentum.
The Leveraged Twist
SOFL employs financial derivatives — like swaps and exchange-listed options — to seek its 2x daily return objective. That implies the fund is intended for short-term tactical trades, not long-term buy-and-hold investments.
More leverage and volatility will make returns compound in unforeseen manners, tending to amplify profits or exaggerate losses, depending on holding period and direction of market movement.
High Octane, High Cost
Priced at an expense ratio of 1.29%, SOFL is at the upper end of the ETF fee scale, a premium reflective of its active daily trading and derivative exposure. Yet for investors who believe in the direction of software platform stocks, the fund might be a potent, albeit dangerous, instrument.
SOFL opens up a high-speed doorway to the changing landscape of software infrastructure and platform-based business models. But with great power (and leverage) comes great responsibility, and perhaps whiplash returns.
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