3X ETF erosion (borrowed from yahoo poster) explained
Erosion is the intrinsic nature of the 3X ETF. NO LIMIT.
That's no secret or require a PhD in finance to figure out.
When it drops, it drops more (3X of GDXJ daily move % is applied to the PREVIOUS CLOSE which is unfairly high for 2/3 of the daily JNUG move)
When it gains, it gains less (3X of GDXJ daily move % is applied to the PREVIOUS CLOSE which is unfairly low for 2/3 of the daily JNUG move)
day 1 close: GDXJ $10 JNUG $10
day 2 close: GDXJ $9 (-10%) JNUG $7 (-30%)
day 3 close: GDXJ $10 (+11.11%) JNUG $9.33 (+33.33%)
JNUG "eroded" -6.7% in this example. And this is what actually happened in the real world, last monday. You guys lost 6.7% over the 2 trading days just holding this stock for 2 days, while GDXJ is unchanged.
Even worse is that JDST erodes twice as fast. Try this in your clean excel spread sheet as an excercise
