The appetite for risk is apparently healthy enough for ProShares that it launched its first 3x leveraged ETFs today. ProShares UltraPro S&P 500 (UPRO) and ProShares UltraPro Short S&P 500 (SPXU) will be the firm’s most aggressive products yet.

UPRO and SPXU are clearly intended as a counter to the very successful DirexionShares 3x ETFs. ProShares may have a slight advantage with these ETFs as they are benchmarked to the more familiar S&P 500 index. Direxion’s 3x Large Cap funds, Daily Large Cap Bull 3x Shares (BGU) and Daily Large Cap Bear 3x Shares (BGZ), are tied to the Russell 1000 Index, which includes many stocks that are considered mid cap or even small cap in the S&P scheme.

The providers of leveraged ETFs are coming under more and more scrutiny as investors discover – and all too frequently misuse – these products. This month the Financial Industry Regulatory Authority (FINRA) reminded brokers of their obligation to make sure customers are fully prepared for the risks of leveraged ETFs. Despite abundant disclosure, people still have a hard time grasping that positions in these ETFs will not receive the stated 2x or 3x leverage if they are held for more than one day.

The release from FINRA contains something that ought to put a chill up the spine of leveraged ETF marketing executives: “…inverse and leveraged ETFs that are reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets.” This is legal-speak for “Don’t sell these to anybody except day traders.”

Don’t be surprised to see brokerage firms place restrictions on who is allowed to trade these ETFs and under what conditions. The potential for large losses in a short time is significant, and brokers do not like dealing with unhappy customers – not to mention that the losses could result in your account balance with them dwindling in the future.

For its part, ProShares is trying to distinguish between its 2x and 3x products by adding an extra “Pro” to the otherwise very similar names. ProShares Ultra S&P 500 (SSO) is 2x, while ProShares UltraPro S&P 500 (UPRO) is the new 3x product. Not exactly crystal-clear but hopefully good enough.

ProShares now offers 86 leveraged and inverse ETFs. We are not sure what will come next, but the race for ETF product innovation is far from over. ProShares wins today’s battle.