📈 Leveraged ETF Volatility Decay Simulator See daily-reset leverage compound over your selected period

What is leveraged ETF volatility decay?

A leveraged ETF usually targets a multiple of an index's return for each day, using derivatives and resetting that exposure daily. It does not promise that its long-term return will equal the index's cumulative return multiplied by the leverage. When prices repeatedly move up and down, the reset-and-compound path can diverge sharply from that intuition; this effect is often called volatility decay or volatility drag.

Important: this is not a historical backtest and cannot predict any ETF's future result. Real products also reflect expense ratios, trading costs, dividends, tracking error and liquidity.

How does the simulator work?

Both the index and ETF start at 100. Each day applies the trend and alternating swing to the index; the ETF multiplies that daily return by 2x, 3x or a custom multiple, then resets its exposure.

Connect the idea to life-cycle investing and the Kelly criterion

Life-cycle investing considers age, earning power and time horizon when allocating assets. The Kelly criterion uses win probability and payoff odds to estimate a theoretical position size. Both ideas point to the same lesson: leverage must be matched to drawdown tolerance, holding period and disciplined rebalancing.

Further reading (English Wikipedia): leveraged ETF, volatility drag, life-cycle investing and the Kelly criterion.