If big returns from investing in biotech are good, then doubling those returns is even better, right? Sounds good in theory, but the two newest ETFs from ProShares aren't going to make that happen over the long term despite their ultra cool names.

The newest offerings are ProShares Ultra Nasdaq Biotechnology (BIB) and ProShares UltraShort Nasdaq Biotechnology (BIS). The first seeks to double the return of the NASDAQ Biotechnology Index, while the other looks to double the movement, but in the opposite direction. That's before fees and expenses, of course.

However, you should remember that these leveraged products seek to double the daily return of the underlying index, not the long-term return. In fact, the long-term return of the ETF is not likely to match the index's long-term return because the index's up and down movement is magnified by the leverage.

Let me explain. Basic math tells us that a 5% decrease is not perfectly offset by a 5% increase. So, if that was the movement over two successive days of the index, it would stand at 99.75% from where it started. But the two-times long ETF would be at 99.00%, trailing the index after just two days. Sure, two-times movement is great on the upside, but it kills you on the downside.

Here's an example showing that both the long and the short "ultra" ETFs can go down, despite their opposite-sounding names. Here's what happened for a similar pair of ETFs that tracked the financial sector in 2009:


2009 Return

ProShares Ultra Financials (UYG)


ProShares UltraShort Financials (SKF)


Source: Morningstar.

Wild daily moves by the likes of Goldman Sachs, JPMorgan Chase, and Citigroup ended up causing both ETFs to decrease last year.

I don't think these new biotech ETFs are a good move in general, because they mute big returns, such as a 633% five-year return with Celgene (Nasdaq: CELG). Ironically, that muting is the only thing saving the new Ultra ETFs from being totally whacked out.

The underlying index is a weighted average that's dominated by big biotech companies like Amgen (Nasdaq: AMGN), Biogen Idec (Nasdaq: BIIB), and Gilead Sciences (Nasdaq: GILD). The huge single-day moves, sometimes up by triple digits, that are possible for smaller companies like Dendreon (Nasdaq: DNDN) and Mannkind (Nasdaq: MNKD), won't move the index as much as they would if every company had an equal weighting. Given the volatile nature of small biotech companies, this point is borne out by my finding, over the last two years, just 21 days where the index moved up more than 3% and only 26 where it fell by that amount.

Further, if the new ultra biotech ETFs had been running over the last two years, and you had held them for that long, you'd have a return of 16.4% for the long one and a loss of 58% for the short one, both before fees and expenses. Compare that to a gain of 17.9% for just holding the index. Hardly the two-times return that some people expect. Not exactly what I'd call a great long-term hold for either side.

Fools, unless you want to hold a basket of biotech's for one day -- and I'd suggest heading to Vegas if that's your thing -- I can't see how either of these ETFs are useful for individual investors.

Motley Fool Rule Breakers is always on the hunt for hot drug stocks and other cutting-edge picks. Click here to see all of our latest discoveries with a free 30-day trial subscription.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.