Ultra OTC Fund - UOPIX Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Ultra OTC Fund - UOPIX

UOPIX 149.70

-0.5%

Dec 8 4:00 PM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: John who wrote (937)	12/5/2000 3:44:19 PM
From: Todd Reichardt	Read Replies (2) of 2063

Using NDX 2800 as a starting point (i.e. 2800 day 1, 3100 day 2, 2800 day 3), here's what I get for an answer: a) UOPIX returns -2.07% b) USPIX returns -6.22% c) cash returns zip (ignoring money market returns) So C is my answer. Day 2 NDX is up 10.7% (21.4% for the 2 beta funds), while day 3 is down 9.68% (19.4% for 2 beta), which on first blush would make it look like a small gainer for UOPIX (21.4-19.4 = 2%), BUT you don't add the returns together you compound them daily (1.214*(1-.194))= 98% meaning a 2% loss. I first ran into this when Craemer wrote the article a couple of months ago where both UOPIX and USPIX was down for the year and he attributed it to a performance issue with profunds. When I ran the calculations using the underlying, I found out that based on the underlying both funds should be down about the amount that UOPIX and USPIX were down for the year. I couldn't figure out how 2 funds that do exactly the opposite things could both be down. The devil is in the details as they do exactly opposite things on a daily basis, but just as 2X on a daily basis doesn't mean you'll get 2X performance on a longer term basis, USPIX and UOPIX won't do exactly the opposite on any period longer than 1 day. The nature of 2X compounding makes it such that even though the underlying was unchanged over a longer period, both the long and short fund can be down. I'm not done studying this. I'm not quite sure how this might impact AIM. Hopefully I didn't screw up the calculations thereby showing my bare butt in public. Todd

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next