George Costanza at it Again: The Leveraged ETF Episode

5 Pages Posted: 9 Jun 2020

Date Written: April 16, 2020

Abstract

In understanding how leveraged ETFs perform, we’ll uncover an important lesson relevant to all investing: how your choice of investment size can be more important than your choice of investment. To summarize, highly leveraged long and short ETFs provide a perfect illustration of how overly-aggressive investment sizing can turn a good trade into a losing one. An investor who borrows money to take a leveraged position in an asset will need to keep trading the asset in order to maintain a constant level of leverage as the asset price fluctuates.

Keywords: ETFs, SPXS, SPXL, leveraged ETFs

JEL Classification: B12, B16, B20, C00, C10, C11, C50, C57, C73, D03, D81, D83, E00, G00, G02, G11, G12, G14, G17, G23

Suggested Citation

White, James and Haghani, Victor, George Costanza at it Again: The Leveraged ETF Episode (April 16, 2020). Available at SSRN: https://ssrn.com/abstract=3584798 or http://dx.doi.org/10.2139/ssrn.3584798

James White (Contact Author)

Elm Partners ( email )

1630 Willow View Drive
PO Box 1417
Wilson, WY 83014

Victor Haghani

Elm Partners ( email )

1630 Willow View Drive
PO Box 1417
Wilson, WY 83014

HOME PAGE: http://www.elmfunds.com

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