bopav
Thesis
Not all 'v' shaped recoveries are the same. Some investors bought the dip via leveraged instruments, but it did not quite work out as anticipated. In today's article we are going to deal with the ProShares UltraPro Russell2000 ETF (
URTY: When Slippage Bites
Summary
- ProShares UltraPro Russell2000 targets 3x daily returns of the Russell 2000 Index, but actual returns can deviate significantly over time.
- Holding leveraged ETFs beyond one day exposes investors to compounding effects and beta slippage, especially in volatile markets.
- Beta slippage can cause leveraged ETF returns to underperform or outperform the expected multiple, depending on volatility and holding period.
- Investors must monitor leveraged ETF positions regularly, considering risk tolerance and investment goals due to potential for significant return deviations.
With an investment banking cash and derivatives trading background, Binary Tree Analytics ('BTA') aims to provide transparency and analytics in respect to capital markets instruments and trades. BTA focuses on CEFs, ETFs and Special Situations, and aims to deliver high annualized returns with a low volatility profile. We have been investing for over 20 years after obtaining a Finance major at a top university.
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