Leveraged Share Decay Tracker [SS]

1월 7일

Releasing this utility tool for leveraged share traders and investors.
It is very difficult to track the amount of decay and efficiency that is associated with leveraged shares and since not all leveraged shares are created equally, I developed this tool to help investors/traders ascertain:

1. The general risk, in $$, per share associated with investing in a particular leveraged ETF

2. The ability of a leveraged share to match what it purports to do (i.e. if it is a 3X Bull share, is it actually returning consistently 3X the underlying or is there a large variance?)

3. The general decay at various timepoints expressed in $$$

How to use:

You need to be opened on the chart of the underlying. In the example above, the chart is on DIA, the leveraged share being tracked is UDOW (3X bull share of the DOW).
Once you are on the chart of the underlying, you then put in the leveraged share of interest. The indicator will perform two major assessments:

1. An analysis of the standard error between the underlying and the leveraged share. This is accomplished through linear regression, but instead of creating a linreg equation, it simply uses the results to ascertain the degree of error associated at various time points (the time points are 10, 20, 30, 40, 50, 100, 252).

2. An analysis of the variance of returns. The indicator requires you to put in the leverage amount. So if the leverage amount is 3% (i.e. SPXL or UPRO is 3 X SPY), be sure that you are putting that factor in the settings. It will then modify the underlying to match the leverage amount, and perform an assessment of variance over 10, 20, 30, 40, 50, 100, 252 days to ensure stability. This will verify whether the leveraged ETF is actually consistently performing how it purports to perform.

Here are some examples, and some tales of caution so you can see, for yourself, how not all leveraged shares are created equal.

SPY and SPXL:


SPY and UPRO:


XBI and LABU (3 x bull share):


XBI and LABD (3 x bear share):


SOX and SOXL:


AAPL and AAPU:


It is VERY pivotal you remember to check and adjust the Leveraged % factor.
For example, AAPU is leveraged 1.5%. You can see above it tracks this well. However, if you accidently leave it at 3%, you will get an erroneous result:



You can also see how some can fail to track the quoted leveraged amount, but still produce relatively lower risk decay.

And, as a final example, let's take a look at the worst leveraged share of life, BOIL:



Trainwreck that one. Stay far away from it!


The chart:
The chart will show you the drift (money value over time) and the variance (% variance between the expected and actual returns) over time. From here, you can ascertain the general length you feel comfortable holding a leveraged share. In general, for most stable shares, <= 50 trading days tends to be the sweet spot, but always check the chart.

There are also options to plot the variances and the drifts so you can see them visually.

And that is the indicator! Kind of boring, but there are absolutely 0 resources out there for doing this job, so hopefully you see the use for it!

Safe trades everyone!

1월 9일

릴리즈 노트

Updated with the ability to see the slippage, expected and actual returns.