just.a.guy

Leveraged ETF Ban Spreading Like the Flu

It all boils down to this:

Leveraged ETFs re-lever every day, and so will have a natural drift away from the underlying based on its volatility

Volatility isn't the only concern, it's also the sequence in which it's achieved -- leveraged ETFs have a high degree of path-dependence.

Those two things make leveraged ETFs like nitroglycerine for the types of buy-and-hold fee-generating cattle that the big brokerages like to corral.

Therefore, they are unsurprisingly banning them.

Here's a good read on the details of levered ETFs and their path dependent option value: www.scribd.com/doc/144...