The essence of leveraged ETF is to ensure that ETF holders enjoy a fixed target multiple of the daily income of the underlying asset by fixing the income of the leveraged fund. This fixed leverage fund is managed by the platform or a fund manager recognized by the platform. The platform publishes the net value of the fund in real time to maintain a high degree of transparency.
Theoretically, the NAV of the fund is the fair trading price of the ETF shares in the secondary market. However, due to fluctuations in market sentiment, the transaction price in the secondary market may deviate from the fair price (net value of the fund) during a certain period of time, resulting in a certain premium.
When the premium exists, there will be arbitrage opportunities, and arbitrageurs in the secondary market can gradually eliminate the premium through arbitrage operations to ensure that the token transaction price closely follows the fair price. For ordinary users, they should pay attention not to deviate too much from the net value of their order price, otherwise they will suffer great losses. At the same time, when the net value price is lower than a certain threshold, the platform will merge the product (the user's total assets will not be affected in any way, but will be subject to price fluctuations during the merger period) to improve the sensitivity of price changes and optimize the trading experience. Movements during the merger can be sold before the merger.
Calculation of the NAV of the Fund
Take one day as a time period (UTC16:00 to UTC16:00 the next day), at the end of the kth period
The moment is recorded as tk,k=0,1,2.....where to=0. Let the initial net value of the unit fund be 100USDT,
That is, S(0)=100USDT.
.S(0): Fund initial value;
.S(t): The net value of the fund at time t, t≥0;
.P(0): the price of the underlying asset at the initial moment;
.P(t): the price of the underlying asset at time t;
.M: The target leverage multiple, which can be 2, 3, -1, -2, -3.
The returns of the fund and the underlying asset in the kth period are
Rs(k)，Rp(k)= (1)
The goal of a fixed leveraged fund is to make its rate of return in each time period equal to the rate of return of the underlying asset.
M times, that is
Rs(k)= M x Rp(k), k:=1,2,....
The net worth of the fund at time v in the kth cycle is calculated by the following formula:
),V v∈[tk-1,tk).
Investors can purchase a certain number of tokens through the secondary market at any time to hold the corresponding share
fund. However, if the investor is at some point v in the first cycle (between tk-1 and tk)
Buying a certain number of tokens, the rate of return from holding the tokens until tk is not equal to the corresponding underlying asset
M times the yield over the same period. Only when investors buy tokens at tk-1 can it be guaranteed
The current rate of return is M times the rate of return on the corresponding underlying asset.
A fixed-leverage fund is essentially an actively managed fund, so that its return in each cycle is anchored to M times the return of the corresponding underlying asset. As the price of the underlying asset changes, the fund position at the beginning of each cycle must be adjusted to ensure this goal can be achieved. Position adjustment is mainly based on the appropriate adjustment of the position based on the net value of the fund at the beginning of each cycle, so that the risk exposure of this cycle is anchored to M times the risk exposure of the corresponding underlying asset. If the net value at the beginning of the current period is S(tk), the exposure set at the beginning of the period is an equivalent USDT position of M * S(tk).
Statement:
Leveraged ETFs are emerging financial derivatives. The above content does not constitute investment advice. Please pay attention to risk control.
Leveraged ETF greatly reduces the risk of liquidation and liquidation, but in extreme market conditions, there is a risk of approaching zero and liquidation. Please pay attention to the difference between net value and price to avoid losses.