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Thread: Question about ETF compounding/return calculation

  1. Default Question about ETF compounding/return calculation

    I am starting to learn about ETFs by trying to do the numbers. When learning about the compounding effect in leveraged ETFs, I wanted to simulate the return for a simple ETF. Here is what I wanted to do: a hypothetical index ETF gains 1% every day for a 10-day range. I wanted to calculate the final return after the range for 1X, -1X, 3X and -3X ETF. Here are the numbers:

    Calc.png

    That means, at the end of 10 days, 1X gained 10.5%, 3X gained 34.4%, -1X lost 10.6% and -3X lost 26.3%.
    Two questions:
    (1) Is the above statement/calculations correct, specifically w.r.t. -1X and -3X ETFs?
    (2) Now if I consider a scenario where the 1X ETF loses 1% every day for 10 days, then can I say the following without additional calculations: at the end of 10 days, 1X lost 10.6%, 3X lost 26.3%, -1X gained 10.5% and -3X gained 34.4%?
    Thanks for helping.

  2. #2

    Default Re: Question about ETF compounding/return calculation

    Sorry I missed this post. It's been quiet around here.

    I would probably need to see the equations before validating. Are you arware of the daily valuations with these leveraged ETF's? You may have taken that into consideration, but just in case, please see this post.

    http://www.etftalk.com/forum/showthr...=1022#post1022

    It has been talked about a few times on this board. Just search on "leveraged".
    -- Tom | My Trades

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