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Stats › Options, shorts and positioning › Leveraged ETF decay

Leveraged ETF decay is a regime effect, and in trending markets it ran the other way

Post-Covid recovery
2.434
Post-crisis recovery
1.389
Sideways market
-0.114
Covid pandemic
-0.019
2022 bear market
-0.014

Compounding effect for a three times leveraged S&P 500 product, defined as the fund's cumulative return minus three times the benchmark's cumulative return, by market regime. Positive means the fund beat its stated multiple. Regimes run from October 2007 to December 2021 plus a 2022 bear window. No significance tests are reported for any of these figures.

Compounding moved three times leveraged S&P exposure 2.43 above three times the index in the post-Covid recovery and 1.39 above it in the post-crisis recovery. In the sideways, Covid and 2022 bear windows it cost 0.11, 0.02 and 0.01. Decay is regime conditional.

+2.434Compounding effect, S&P 3x, post-Covid recovery
-0.114The same in the sideways market window
+3.370Compounding effect, Nasdaq 3x, post-Covid recovery
-1.219Compounding effect, Nasdaq minus 3x, financial crisis

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