The Truth About Dead Cats and Leveraged ETF Dogs

All you ever wanted to know about leveraged ETFs from the people who know everything about them: Barclays Global Investors.

Some take aways:

"For example, a broad 1% move in the US equity market would result in additional Market On Close demand of about 17%, while a 5% move is associated with demands equal to 50% of the
close." - can someone spell massive convexity?

"Generally, the greater the holding period and the higher the daily volatility, the greater the deviation between the leveraged ETF's return and a statically levered position in the same index. Note also that as leverage is embedded in the product, individual investors can gain additional leverage by buying these products on margin. Better education, margin restrictions, and tighter requirements on investor eligibility are possible options regulators could consider."

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