Comments on: SEC Regulation of Leveraged Short ETFs Coming? http://etffundinvesting.com/inverse-etfs/sec-regulation-of-leveraged-short-etfs-coming/ News and Tools for Exchange Traded Funds (ETFs) Thu, 03 Jun 2010 00:28:40 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Whatever http://etffundinvesting.com/inverse-etfs/sec-regulation-of-leveraged-short-etfs-coming/comment-page-1/#comment-24 Whatever Wed, 27 May 2009 18:39:18 +0000 http://etffundinvesting.com/inverse-etfs/sec-regulation-of-leveraged-short-etfs-coming/#comment-24 It's because of two things: volatility and momentum. A high volatility has a depressing effect on both short and long leveraged ETF's. This can be massive if volatility is very high. Likewise a relatively low volatility raises both short and long leveraged ETF's. I believe the point at which the net effect is about zero for the S&P 500 is when its volatility index is about 20 (don't know about other indexes). (http://finance.yahoo.com/q?s=^vix) About momentum: apparently if a (short or long) leveraged ETF is making profit (its stock price is going up), the leverage is increased and vice versa. Thus: best case scenario for (short and long) leveraged ETF's: a steady increase of its price under low volatility. Worst case scenario: a non-directional market with high volatility. It’s because of two things: volatility and momentum.

A high volatility has a depressing effect on both short and long leveraged ETF’s. This can be massive if volatility is very high. Likewise a relatively low volatility raises both short and long leveraged ETF’s. I believe the point at which the net effect is about zero for the S&P 500 is when its volatility index is about 20 (don’t know about other indexes).
(http://finance.yahoo.com/q?s=^vix)

About momentum: apparently if a (short or long) leveraged ETF is making profit (its stock price is going up), the leverage is increased and vice versa.

Thus: best case scenario for (short and long) leveraged ETF’s: a steady increase of its price under low volatility. Worst case scenario: a non-directional market with high volatility.

]]> By: FLAMAN http://etffundinvesting.com/inverse-etfs/sec-regulation-of-leveraged-short-etfs-coming/comment-page-1/#comment-21 FLAMAN Sun, 10 May 2009 17:44:54 +0000 http://etffundinvesting.com/inverse-etfs/sec-regulation-of-leveraged-short-etfs-coming/#comment-21 Would someone please explain, in simple English, why the leveraged ETFs under perform over longer periods of time. If they are constructed to "match" the ups and downs of their stocks, why does this price match happen? Would someone please explain, in simple English, why the leveraged ETFs under perform over longer periods of time. If they are constructed to “match” the ups and downs of their stocks, why does this price match happen?

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