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james22
1 Comment
ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
As has been already said in earlier comments - it's the constant 200% leverage at work, dumdum. Twice the daily return (which are these funds mandates) will exceed twice the overall return over an extended period when markets are trending, and underperform in markets that see many trend reversals, even in a perfect world of zero management fees and zero tracking error. In essence holders of 2X ETF's are short daliy realized volatility of the index.If you plot the long-minus-short portfolio 'shortfalls' against the realized volatilities of each index over the corresponding periods, you should see that sectors with the highest volatilities would have the largest shortfalls. Apr 29 12:02 PM