Mathematically this mistake is roughly the same as what people miss about the Kelly criterion. When you size bets large enough, the most likely result is a poor outcome, but the expected value only becomes more positive - it just gets concentrated in an increasingly improbable, explosively profitable tail.
By releveraging, ETFs turn the linear results of the stock into an exponential. The expected change in value of a dollar invested in the 2x leveraged ETF must be equal to the expected change in value of $2 in the underlying (ex fees, assuming days are independent) - thus the volatility drag is only the price you pay for the extreme outperformance in tail scenarios. Leveraged ETFs therefore do exactly the job they're tasked with - just as long as you don't take the "2x" or "3x" at face value.
Unfortunately I have already tried with two different emails to register and it is impossible because of the same error (one from GMAIL and one from another)
Mathematically this mistake is roughly the same as what people miss about the Kelly criterion. When you size bets large enough, the most likely result is a poor outcome, but the expected value only becomes more positive - it just gets concentrated in an increasingly improbable, explosively profitable tail.
By releveraging, ETFs turn the linear results of the stock into an exponential. The expected change in value of a dollar invested in the 2x leveraged ETF must be equal to the expected change in value of $2 in the underlying (ex fees, assuming days are independent) - thus the volatility drag is only the price you pay for the extreme outperformance in tail scenarios. Leveraged ETFs therefore do exactly the job they're tasked with - just as long as you don't take the "2x" or "3x" at face value.
Love that framing; thanks
Thanks Andrew, very interesting.
Unfortunately I have already tried with two different emails to register and it is impossible because of the same error (one from GMAIL and one from another)
I've emailed them about it; i'm still trying to find a way