Calculating maximums of inverse ETFs.
- Thread starter c.chugani
- Start date
I guess you can get an approximation by looking at the long unleveraged ETF from the same fund family. Look at the ratio between the two in thjis case one point igain in the long means 2 point loss in the short (see if it's consistent over time not sure how exactly they get their leverage). Calculate how many points the short will go up if the long ETF goes to 0 (which will never happen) .
it's related to procentual change. If the index goes down 10% the inverse ETF should go up 10%. If it goes from from 1 to 0.8, the inverse ETF goes up another 20%, if it goes from 0.8 tot 0.64 it goes up another 20%. 0 is the limit move, just like infinity of the reverse ETF.
Of course in reality it will never reach infinity, just like an ETF in reality will never reach 0. Bankrupt firms would be replaced in the index of the ETF.
Of course in reality it will never reach infinity, just like an ETF in reality will never reach 0. Bankrupt firms would be replaced in the index of the ETF.
