double decaying for FAZ

dara

say,

XLF at 10 yesterday close, today it close at 11. FAZ will drop 30%,

tomorrow all finance stocks goes back to yesterday value, XLF back to 10.

but the drop percentage will be less than 10%,  it is 9%(1/11).

so the new value for FAZ would be 70% x (1 +27%) =87%. a decay of 13%.

The decay happens at two place:
  1. the base value is less (70%)
  2. the percentage is less (27%).

But for FAS, it does not have the second decay(actually 2 benefits FAS becaue up pecentage is high, it does not matter it up or down first.)
FAS would be 130% x (1 -27%) =95%. a decay of 5%


In Summary, short 2x 3x ETFs decay way fast than long 2x/3x ETF.

Macrotrader

你跟本就是美国学的MATH.please go back to China and study Math there.

dara

你跟本就是美国学的MATH.please go back to China and study Math there.
Macrotrader 发表于 2009-5-4 18:10

tell me your calculation, I want to learn.

raise3

老大，你算算xlf从10到9再到10 FAS的结果。。。

Macrotrader

fas/faz 都是应边量.SO  time dacay for the both  depends on 自边量的方向.(most likely 3*YIF)

Macrotrader

Sorry,should be 3*IYF

dara

老大，你算算xlf从10到9再到10 FAS的结果。。。
raise3 发表于 2009-5-4 18:16

Lao da, you should calculate it by yourself then you understand what I say.

There is no double decay there.

it will (1-30%) x ( 1+ 33%(not 27%)) = 93.1%, a decay of 7%, not 13% like FAZ.

raise3

come on, 你这计算本身都是bias的啊。一个是先跌10%再涨11%，一个是先涨10%再跌9%，都是跌的多涨得少，FAS当然比FAZ表现好了。。。
另外，偶上一个帖子说的不对，抱歉。

Lao da, you should calculate it by yourself then you understand what I say.

There is no double decay there.

it will (1-30%) x ( 1+ 33%(not 27%)) = 93.1%, a decay of 7%, not 13% like FAZ.
dara 发表于 2009-5-4 18:26

fisheatme

呵呵，所以说trend favorate the corresponding ETF
你算算连续等幅下跌的时候faz如何？


不过这两天faz恐怕比较惨，不知道能不能挺住

dara

come on, 你这计算本身都是bias的啊。一个是先跌10%再涨11%，一个是先涨10%再跌9%，都是跌的多涨得少，FAS当然比FAZ表现好了。。。
另外，偶上一个帖子说的不对，抱歉。

raise3 发表于 2009-5-4 18:45

That is my whole point, long 2x/3x ETFs do not have the second decay.

Dude, you need learn your math, not me.