RezaJ

Understanding Levered ETFs and Geometric Returns

What I meant in my previous comment above is weekly not daily. So we short dollar equivalent of both the levered and the inverted ETFs do and rebalance on a weekly basis. This should lock us into a return of 4s^2 where s is the weekly vol.

/m

Understanding Levered ETFs and Geometric Returns

If I short a 2x levered and a 2x inverse levered ETFs, in equal dollar amounts (rebalanced everyday), according to the formulas in this article I should lock into a daily return of 4s^2.

That does not happen. I wonder what else is missing from the formulas.

/m