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Strategies & Market Trends : Technology Stocks & Market Talk With Don Wolanchuk

SOXL 38.58

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Dec 18 4:00 PM EST

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To: Winfastorlose who wrote (191561)	7/7/2023 5:09:27 PM
From: nicewatch	Read Replies (1) of 207331

Not exactly, at least as I understood it but confess to not reading the prospectuses of the 2x and 3x in many years. When I read them back then, they were reset daily. They were structured to achieve the 2x or the 3x for that particular day. The next trading day was a new game, so to speak, as was each day following. It's the daily reset that creates the slippage and decay unless you can well time a larger trend move. Moreover there is counterparty risk with the bank that the instrument settles with daily. It's really that bank that is using the derivatives and or some type of OTC swap(s) to arrive at the desired 2x or 3x outcome per day. So a company like Direxion might design a 2x or 3x product benchmarked against index xyz but then Direxion is also a client of whichever bank it settles with daily to achieve said daily goal of product. At least that's how it used to work I think? If I have time this weekend will reread the fine print.

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