Robot Comments for September 27, 2011

[nickola.pazderic]

Billy--

Do you (or anyone, thanks!) know why IWM rose into the close after the sell off today? Is such a move significant?



Many thanks,

[davidallison@gmail.com]

Pascal/Billy or anyone,

I'm having a hard time understanding why the triple returns of TNA/TZA differ so much from IWM returns. It certainly varies for the time period selected. For the last 12 months IWM was basicaly flat with TNA down 20% and TZA down 40%.

One year return
IWM

TNA

TZA


From July 1st to close on Friday
IWM

TNA

TZA


From Jan 1st to close July 1st
IWM

TNA

TZA

[Billy]

[QUOTE=davidallison@shaw.ca;17116]Pascal/Billy or anyone,

I'm having a hard time understanding why the triple returns of TNA/TZA differ so much from IWM returns. It certainly varies for the time period selected. For the last 12 months IWM was basicaly flat with TNA down 20% and TZA down 40%. ]

David, this is due to the well documented leverage decay effect. See for example:
http://www.etfbase.com/leveraged-etf-decay/ or google for oher articles on leverage decay.
The smart way to play decay to your advantage is to short TNA instead of buying TZA or to short TZA instead of buying TNA.
Billy

[Billy]

Billy--

Do you (or anyone, thanks!) know why IWM rose into the close after the sell off today? Is such a move significant?

Attachment 10577

Many thanks,

No, the robot doesn't care about post and pre-market activity.
Billy