Leveraged Exchange-Traded Funds: Price Dynamics and Options Valuation

Free book download

The ETF industry has experienced tremendous growth over the past decade. Within the ETF universe, some funds are designed to replicate a constant multiple (called leverage ratio) of the daily returns of a reference index. These relatively new financial products are called leveraged ETFs (LETFs).

The returns of SPY (+1), and its leveraged ETFs, SSO (+2x) and SDS (-2x), from Feb 1 to May 1, 2021.