User 52851

Triple Leverage ETFs Should Be Reserved for the Strongest Conviction

I read that these ETF's are rebalanced daily. So my question remains - however unlikely it may be, if the underlying index does go down more than 33.3333% or so, it will go down more than 100%. In fact, that's why I believe we'll never see 10X or 20X ETF's. I'd love to hear more on this.


On Nov 17 11:20 PM Fatty wrote:

> User 52851 -- its not possible for it to go down more than 100%.
>
>
> So ideally, since its targeting the daily returns, the fund management
> should have some sort of constant rebalancing strategy in place.
> For small moves, a periodic rehedging using derivatives should allow
> them to maintain the approximate leverage ratio. However, as the
> underlying, targeted asset moves more, the fund will have to rehedge
> to readjust the leverage ratio.
>
> Basically, I think they would try to provide an "instantaneous&amp...
> 3x returning portfolio. In typical cases, a day-over-day portfolio
> value would match this. If they rehedged intraday, it would be from
> the point where the fund was rehedged that it would be "returning
> 3x".
>
> So for example, if the benchmark was up 30% and the 3x bear ETF was
> hedged at every 10% interval, the ETF would be down 30%, three times,
> or .70*.70*.70 = 44% of the fund would remain at the end of the day,
> so down 56%. Depending on what their rebalancing strategy was, it
> could lead to dramatically different end-of-day returns,

Triple Leverage ETFs Should Be Reserved for the Strongest Conviction

If the index it tracks goes down 34%, will it go down 102%? How’s that possible?

Triple Leverage ETFs Should Be Reserved for the Strongest Conviction

If the index it tracks goes down 34%, will it go down 102%? How’s that possible?

New Direxion Triple Leverage Funds: Proceed with Caution

If the index it tracks goes down 34%, will it go down 102%? How’s that possible?