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December 12, 2008

More Fun with Levered ETFs

Lately I find myself repeatedly explaining how levered ETFs work, so I thought I would help myself out by putting up a table that gets the point across empirically. The gist: Such products reset on a daily basis, so you are really levering up only on a single-day’s numbers, not on a multi-day trend. The difference can be highly significant, as this table shows.

Note: I’m not saying the following is bad. It’s just something you need to be sure you know when trading levered ETFs. They don’t always act the way you might naively think they do.

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