LETFs: Volatility Decay & Optimal Leverage

The inner workings of Leveraged ETFs, optimal leverage, and outperforming the market

Hello!

This marks the start of a series on leveraged ETFs—their mechanics, how they work under different market conditions, and how specific strategies using LETFs have outperformed the market in the past (and may continue to do so in the future).

Most of you likely have a general idea of what a leveraged ETF is. However, few truly understand the inner workings of these products and what actually drives their performance (which, as you’ll see, is quite interesting).