(FORTUNE Magazine) – If August's wild Dow vacillations didn't frighten you, you may have the fortitude for a trio of souped-up index-fund families. Rydex Series Trust Funds, Potomac Funds, and ProFunds lead a growing number of hot-rod funds that use futures and options either to track or to move inversely to indexes like the S&P 500. Without hefty fees or loads, they're great for quick-witted market players who want to be superlong on Tuesday and short by Wednesday afternoon. While the rewards can be phenomenal--some promise to outperform an index by 200%--the downside can be just as breathtaking. If the market swan dives, and you're in a bull-market fund, you'll lose big. For example, when the S&P dipped 3.6% on Aug. 4, the ProFunds UltraBull fund tanked 7.5%.

So what separates these fund families, which are all within 25 miles of each other in the Washington, D.C., corridor? On the surface, not much. All offer similar products, catering to the same audience--sophisticated investors who can put up the $25,000 minimum sometimes required. With $3 billion in assets, Rydex, based in Rockville, Md., has the longest track record. (In fact, both ProFunds and Potomac Funds were founded by ex-Rydex employees, fueling animosity between the older company and the neophytes.) Its flagship Nova fund aims to return 150% of the S&P's performance--and over the past five years it's been pretty successful, returning a cumulative 221%, handily beating the S&P's 173% gain. (None of these funds match their promised returns exactly because of compounding and trading costs.)

Former Rydex employees Terry Apple and Tim Hagan thought this idea could be applied to other indexes. So they opened shop in Alexandria, Va., launching Potomac Funds in October. The family offers funds similar to Rydex's S&P-based products--called Potomac U.S. Plus and U.S./Short. Furthermore, Potomac recently launched funds to track the Nasdaq 100 in both directions. If you had bet on the OTC Plus fund earlier this year, you'd be doing well. The fund, which attempts to return 125% of the index, has gained 44%. Investors, however, have been slow to notice Potomac--its assets stand at a paltry $60 million.

The third competitor in the hot-rod fund arena, ProFunds, in Bethesda, Md., has had more success. After nine months it has attracted assets of $200 million. Along with funds linked directly to the performance of the S&P 500, ProFunds offers supercharged S&P 500 funds, which promise to double the daily performance of the index, as well as Nasdaq-linked funds. "I thought that we could take the Rydex concept to the next level," says Michael Sapir, president of ProFunds, who helped found Rydex. Instead of relying on options and futures, ProFunds invests about 90% of the fund's assets in short-term money market instruments to amplify the movements of stock indexes. It uses a rocket-scientist-like formula created by William Seale, its portofolio director. This tricky strategy has made fledgling ProFunds quite successful. Its UltraOTC, which attempts to double the daily return of the Nasdaq 100, is up 76%, compared with 37% for the index. "We give investors the most pure investment exposure available," Sapir says. ProFunds also gives investors the most maneuvering time. If you place an order before 3:50 p.m., it'll be processed that day.

Still, gaining ground on Rydex may prove difficult as its wily president is taking the highflying fund concept even further. In April, Rydex launched 14 sector funds, designed for quick-moving investors. Unlike Fidelity Investments' sector funds, which impose fees if they're dumped within 30 days, investors in the Rydex sector funds can be in retail today and energy tomorrow. "I haven't considered matching the products of my competitors. That would be chasing them," says Skip Viragh, president and founder of Rydex. He'd rather stay ahead of the execs that he trained.

--Julie Creswell