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Yes, your table is correct... the proverbial "catch" is in your assumptions of small gains, with nil volatility. Because volatility is itself the catch with levered strategies in general (and levered ETFs very specifically). Replicate these 1% returns with a 14.14% standard normal deviation, for a thousand, million, billion runs. Your 1% compound ...


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For a leveraged ETF, with a a leverage of $L$, then the value of the ETF is: $$ \mathrm{ETF}_{t_n} = \mathrm{ETF}_{t_0} \cdot \Pi_{i=1}^{i=n} \left[ 1+L\left(\frac{S_{t_i}}{S_{t_{i-1}}}-1\right) - f \cdot \mathrm{DCF}(t_{i-1}, t_i)\right]$$ where $t_i$ are the dates on which the ETF rebalances to restore the leverage. $f$ is the ETF management fee, and $\...


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Market makers may take loans out to create ETF shares or redeem shares to repay loans. In my experience working with an ETF desk, that activity usually does not affect index pricing much. However, in a crisis it could lead to mispricings versus index futures if creation or redemption is restricted. What you also see is that ETF market makers use loans (repos ...


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Investors buy (and hold) more puts and pay up more for them for a few reasons. First, people fear downside more than they like upside as shown by Kahneman and Tversky (1979, 1992). Second, people may not be able to recover easily (or at all) from downside in the macroeconomy. In classical finance terms, if we think crises are different from times of stable ...


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There are two types of loans involved in creating and redeeming ETFs: Stock or bond borrow / repo Collateral requirements for the creation/redemption process. When you create and redeem ETFs you often don't have the perfect basket. Or you might take some time to accumulate the basket. You need to finance those positions using borrow (For shorts) and ...


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