Hi Jack....Re: 2X and 3X ETFs.
Another type of comparison I have done in the past is to compare the 2X and 3X Long ETFs with their inverse Short counterparts on a daily basis.
Yesterday it went this way:
-1.41% - SSO
+1.42% - SDS
-2.15% - BGU
+2.11% - BGZ
From what I have seen in the past the leveraged Long and Short ETFs are reasonably close in their mirror percentage change results on a daily basis.
Just thought of something else which might contribute to these ETFs not having the exact mirror percentage change on a daily basis. ETFs are different from closed-end funds, which have a set number of shares available for trading. I could be wrong, but it is my understanding that since ETFs do not have a set number of shares available for trading, they are created and are also retired during intraday trading based upon investor demand. Would the intraday price at the time of an ETF unit creation have a bearing upon the end of the trading day percentage change? ETFs may begin the trading day on equal footing, but does supply and demand during intraday trading help contribute to the trading percentage change at the end of the day?
Suppose that the market declines during the day. Suppose that trading during that particular day creates a demand for more of the Short leveraged ETFs, while, in turn, there is less demand for the Long leveraged ETFS. Since stock prices change minute to minute, second to second, during the day, would that also have an impact on the ETF's percentage change at the end of the day? Since these ETFs are leveraged, which intensifies the results, would that also have an impact on the percentage differences because of intraday trading?
For example, yesterday was a "down" day. The above mentioned ETFs traded the following shares yesterday.
SSO - 26.4 million shares
SDS - 36.2 million shares
BGU - 6.1 million shares
BGZ - 10.2 million shares
Since yesterday was a "down" day overall in the markets, did investor demand during the day for more of these Short leveraged ETFs cause more of these ETFs units to be created for intraday trading based upon the intraday prices, which in turn might have help add to the end of the day percentage discrepancy between the mirror counterpart ETFs?
Don't have the answer to that question, or if this intraday ETF unit creation even has an impact on the percentage change at the end of the day. Maybe someone else more familiar with these leveraged ETFs does.
Best regards,
Ray
AI
