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Strategies & Market Trends : The coming US dollar crisis
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To: RockyBalboa who wrote (24545)11/21/2009 8:34:33 AM
From: Real Man  Read Replies (1) of 71441
 
Yes, for leveraged funds it's the mathematical effect of
high volatility that is a huge drag on performance.

For example:

The underlying is down 3%, 3x bull is down 9%.
The next day the underlying goes up to unchanged (3.093%),
the fund goes up 9.29%, as it perfectly tracks 3x the underlying.

Guess the net result for 3x fund for 2 days of trading. Nope,
it's not unchanged. The 3x fund is down 0.56% for two days,
even though it fulfilled its objective perfectly.
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