AdvancedMAD Academy0:46Derivatives

Daily Means Daily

A 3x fund promises three times the daily return, and compounding those daily results over time produces something quite different.

0:46 · 6 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00A three-times fund gives three times the daily move. Only the daily move.
  2. 0:05Volatility decay, shown. Up ten then down ten leaves the index near flat and the fund well down.
  3. 0:15Why it happens. The fund rebalances daily, so each day's leverage applies to a new base.
  4. 0:24The condition that decides it. In a smooth trend it can beat the multiple. In a choppy one it badly lags.
  5. 0:33The stated purpose. Every prospectus says these are daily instruments. That sentence is not boilerplate.
  6. 0:41Match the holding period to the product's own stated horizon.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Daily Means Daily — MAD Academy Training Video · MadStockAlerts