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SHORT/LEVERAGED ETF/ETP SIMULATOR

 

The downloadable spreadsheet below illustrates how a Short or Leveraged Daily ETP performs over a period of 11 days. Leveraged (or Short) Daily ETPs are Exchange Traded Products (ETPs, ETFs, ETNs, ETCs) which provide a daily return that is a multiple of the daily return of an index (or, in the case of a short daily ETP, the inverse daily return of an index).

 

The simulator allows the user to:

  • Type in a leverage factor for a daily short or leveraged ETP; and
  • Type in daily returns for an index for each one of 11 days or select from three pre-defined scenarios of trending and volatile markets

Based on the user's input, the spreadsheet calculates the cumulative performance of the index and the Short or Leveraged Daily ETP which tracks it. It allows the user to examine the performance of a Short or Leveraged ETP and the impact of the daily compounding effect over time, in multiple market scenarios and for different leverage factors.

 

Click here to download the Short/Leveraged ETF/ETP simulator

 

 

 

THE COMPOUNDING EFFECT

A bank account that compounds interest at 1% every month will end the year with more than 12% compounded interest earned. In the same way, investment returns over a period longer than one day are affected by the compounding of daily returns. Daily compounding may lead to returns that are greater or less than the sum of the daily returns and which may not be expected by an investor who is not familiar with compounding or the compounding of daily leveraged returns. The compounding effect can positively enhance returns in trending markets (upward or downward) whilst negatively impacting returns when the market is more volatile or trending sideways for extended periods. The compounding effect is amplified when daily returns are leveraged. To further understand the effect of daily compounding and short or leveraged returns, please read our related fact sheet "Compounding Explained".

 

DISCLAIMER

The spreadsheet is for Professional Clients (as defined by the FCA Handbook under COBS 3.5) only. The spreadsheet is intended solely for educational purposes. It is aimed at providing a simple illustration of Leveraged ETP performance and therefore makes assumptions which do not account for all circumstances which can occur in real trading and may adversely affect the performance of such an ETP. For clarity of presentation, the simulation omits the effect of fees. WisdomTree Europe Ltd or Boost Issuer PLC (together “Boost”) do not check the provided information or results for accuracy, errors or omissions. Boost does not take any responsibility for the use of this spreadsheet, and in particular any responsibility regarding potential losses users may incur by relying on information contained therein. The value of an investment in Leveraged ETPs may go down as well as up and past or simulated performance is not a reliable indicator of future performance. An investment in ETPs is dependent on the performance of the underlying index, less costs, but it is not expected to match that performance precisely. ETPs involve numerous risks including, among others, general market risks relating to the relevant underlying index, credit risks on the provider of index swaps utilised in the ETP, exchange rate risks, interest rate risks, inflationary risks, liquidity risks and legal and regulatory risks. Leveraged ETPs are products which feature specific risks that prospective investors should understand before investing in them. Higher volatility of the underlying indices and holding periods longer than a day may have an adverse impact on the performance of Leveraged ETPs. As such, Leveraged ETPs are intended for financially sophisticated investors who wish to take a short term view on the underlying indices. As a consequence, Boost ETP is not promoting or marketing Boost ETPs to Retail Clients. Investors should refer to the section entitled "Risk Factors" and “Economic Overview of the ETP Securities” in the Prospectus for further details of these and other risks associated with an investment in Leveraged ETPs and consult their financial advisors as needed.