Leveraged ETF products have a special rebalancing mechanism to adjust the constant leverage multiples. If the underlying asset generates a floating profit, the underlying position will increase; if the underlying asset generates a floating loss, the underlying position will decrease. Because of the characteristics of leveraged ETF products, it is determined that it is suitable for a specific market environment.
1. One-sided rising market, ETF characteristics:
The graph is calculated as follows:
On the second day, BTC rose from $10,000 to $10,100, up or down by 1%, and did not reach the triggering rebalance condition, that is, the net value was still $10,000;
On the third day, BTC rose from $10,000 to $10,500, up or down by 5%, reaching the triggering rebalance condition;
The net value of BTC3L becomes: $10,000 × (1+5%× 3) = $11,500
The net value of BTC3S becomes: $10,000 × (1-5%×3) = $8,500
On the fourth day, BTC rose from $10,500 to $10,900, a change of 3.81%;
The net value of BTC3L becomes: $11,500 × (1+3.8%× 3) = $12,814
The net value of BTC3S becomes: $8,500 ×(1-3.81%×3) = $7,528
It can be seen that in the four-day uptrend
The increase of BTC3L is: ($12,814 - $10,000)/ $10,000*100% = 28.14% >27%
The drop of BTC3S is: ($10,000 - $7,528)/ $10,000 * 100% = 24.72% ＜27%
According to the data, in the unilateral uptrend, the profit of 3 times long BTC in leveraged ETF products is higher than that of futures; From this, it can be concluded that leveraged ETF products have outstanding advantages in unilateral rising market.
2. The unilateral falling market, ETF characteristics:
The graph is calculated as follows:
On the second day, BTC fell from $10,000 to $9,900, a drop of 1%, and did not meet the triggering rebalance condition, that is, the net value was still $10,000;
On the third day, BTC fell from $10,000 to $9,500, a drop of 5%, reaching the triggering rebalance condition;
The net value of BTC3L becomes: $10,000 × (1-5%× 3) = $8,500
The net value of BTC3S becomes: $10,000 × (1+5%×3) = $11,500
On the fourth day, BTC fell from $9,500 to $9,100, a drop of 4.21%
The net value of BTC3L becomes: $8,500 × (1-4.21%× 3) = $7,426
The net value of BTC3S becomes: $11,500 × (1+4.21%×3) = $12,953
It can be seen that in the four-day down market
The drop of BTC3L is: ($10,000 - $7,426)/ $10,000 * 100% = 25.74% ＜27%
The increase of BTC3S is: ($12,953 - $10,000)/ $10,000 * 100% = 29.53% > 27%
According to the data, in the unilateral down market, the loss of 3 times long BTC in leveraged ETF products is lower than that of 3 times long futures; the profit of 3 times short BTC in leveraged ETF products is higher than that of 3 times short futures. From this, it can be concluded that leveraged ETF products have outstanding advantages in a unilateral downtrend.
3. The volatile market, ETF characteristics:
The graph is calculated as follows:
On the second day, BTC fell from $10,000 to $9,500, a drop of 5%;
The net value of BTC3L becomes: $10,000 × (1-5%× 3) = $8,500
The net value of BTC3S becomes: $10,000 × (1+5%×3) = $11,500
On the third day, BTC rose from $9,500 to $10,000, an increase of 5.26%;
The net value of BTC3L becomes: $8,500 × (1+5.26%× 3) = $9,842
The net value of BTC3S becomes: $11,500 × (1-5.26%×3) = $9,685
On the fourth day, BTC rose from $10,000 to $10,500, a change of 5%;
The net value of BTC3L becomes: $9,842 × (1+5%× 3) = $11,318
The net value of BTC3S becomes: $9,685 × (1-5%×3) = $8,232
It can be seen from this that in the four-day turbulent market
The increase of BTC3L is: ($11,318 - $10,000)/ $10,000 * 100% = 13.18% ＜27%
The drop of BTC3S is: ($10,000 - $8,232)/ $10,000 * 100% = 17.68% > 27%
According to the data, under the volatile market, the profit of 3 times long BTC for leveraged ETF products is lower than that of 3 times the futures; From this, it can be concluded that leveraged ETF products are at a disadvantage in the volatile market.
To sum up, leveraged ETF products are more suitable for unilateral market trends, and in volatile market conditions, there may be net value wear and tear. If you encounter severe intraday fluctuations, the loss of equity may be greater, please pay attention to the risks.
4. Compared with the old leveraged ETF products:
The graph is calculated as follows:
On the second day, BTC fell from $10,000 to $9,900, a drop of 1%;
BigONE's new ETF: No rebalancing triggered, BTC3L net value: $10,000, BTC3S net value: $10,000.
Legacy ETFs:
The net value of BTC3L becomes: $10,000 × (1-1%× 3) = $9,700
The net value of BTC3S becomes: $10,000 × (1+1%×3) = $10,300
On the third day, BTC rose from $9,900 to $10,000, an increase of 1.01%;
BigONE's new ETF: No rebalancing triggered, BTC3L net value: $10,000, BTC3S net value: $10,000.
Legacy ETFs:
The net value of BTC3L becomes: $9,700 × (1+1.01%× 3) = $9,994
The net value of BTC3S becomes: $10,300 × (1-1.01%×3) = $9,988
On the fourth day, BTC rose from $10,000 to $10,100, an increase of 1%;
BigONE's new ETF: No rebalancing triggered, BTC3L net value: $10,000, BTC3S net value: $10,000.
Legacy ETFs:
The net value of BTC3L becomes: $9,994 × (1+1%× 3) = $10,294
The net value of BTC3S becomes: $9,988 × (1-1%×3) = $9,688
On the fifth day, BTC fell from $10100 to $10000, a decrease of 0.991%;
BigONE's new ETF: No rebalancing triggered, BTC3L net value: $10,000, BTC3S net value: $10,000.
Legacy ETFs:
The net value of BTC3L becomes: $10,294 × (1-0.991%× 3) = $9,988
The net value of BTC3S becomes: $9,688 × (1+0.991%×3) = $9,976
On the basis of the old version of ETF products, BigONE leveraged ETF products innovatively apply timed conditional rebalancing. The system automatically detects whether it is eligible for rebalancing at 0:00 every day. The rise and fall of BTC in the above chart does not meet the timed conditional rebalancing. Therefore, no rebalance management was performed for 5 days.
The old version of leveraged ETF products is a timed rebalancing mechanism, all open accounts are forced to rebalance management at 0:00 every day.
To sum up, BigONE's innovative leveraged ETF products have made more reasonable improvements to the old ETF products, are more considerate and fair to users, and allow users to have a better trading experience.
Comments
0 comments
Article is closed for comments.