Q3. Triple-leveraged ETFs

Underlying unlevered ETF demonstrated the following path over a four day period:

Day	0	1	2	3	4
Price	100	110	100	90	100

Assuming risk-free rate of interest of zero for both lending and borrowing.

a.You are managing a 3X leverage ETF that targets 3 times the daily return of the underlying index. If the starting with a price of 100, what is the daily price?

Day	0	1	2	3	4
Price	100

b.You are managing a 3X leverage ETF that targets 3 times the daily return of the underlying index. If the starting with a price of 100, what is the daily position in the un-levered ETF and cash?

Day	0	1	2	3	4
Position in unlevered ETF	300
Position in cash	-200

Day	0	1	2	3	4
Rebal Trade in ETF
Change in Cash

Answer rating: 100% (QA)

To calculate the daily price of a 3X leverage ETF you need to multiply the daily return of the under... View the full answer