Under normal circumstances, the platform will rebalance the position at 00:00:00 every day to ensure that the combined leverage ratio and the agreed ratio will not deviate too much. When there is severe fluctuation, if the fluctuation range of the underlying asset compared to the last rebalance point exceeds a given threshold (initially, we set the threshold to 11% for 3 times long and short, and in the future, if products with other multiples are used, the threshold may be higher. different), we also conduct temporary rebalancing to control portfolio risk.
Temporary rebalancing is only for the party that loses due to the fluctuation range, that is, if BTC rises by 11%, we will rebalance the leveraged ETF of -3 times, and make no adjustment to other products. Please note that if the market trend continues after the occasional rebalancing is triggered, the user's loss will become smaller, but if the market trend reverses immediately after the triggering, the rebound speed of the product will also be weakened due to the rebalancing.
As previously mentioned, a daily leveraged ETF that makes a profit reinvests that profit. If there is a loss, sell some positions to restore the leverage to 3 times to avoid the risk of forced liquidation.
Take the positive BTC three times long product as an example, if the daily trend of BTC is +10%, +10%, +10%, +10%, then the 4-day yield of this product is 185%, which is higher than 3 times the 46% spot profit on the 4th; if the daily trend of BTC is -10%, -10%, -10%, -10%, then the 4th loss of the product is 76%, which is less than the 4th spot loss 3 times of 35%; if the daily trend of BTC is +10%, -10%, +10%, -10%, then the 4-day yield of this product is -17%, which will underperform the 4-day spot yield -2% 3x.
Therefore, when the time spans a rebalancing cycle, leveraged ETFs cannot guarantee that the multi-day cumulative yield and spot yield maintain a fixed multiple relationship. Generally speaking, under the trend market, the performance of leveraged ETF will be better than the declared leverage ratio (that is, the cumulative increase of the ETF in the same direction will exceed 3 times of the underlying rate of return, and the decline of the ETF in the opposite direction will be less than 3 times of the underlying rate of return). ), and the performance of leveraged ETFs will be worse than the declared leverage multiple in volatile market conditions.
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.