tag:blogger.com,1999:blog-2399872815067856997.post526454763363883966..comments2021-01-11T04:03:12.658-05:00Comments on SLCG Blog: Direxion to Close Several Leveraged ETFsSandy Ouanohttp://www.blogger.com/profile/08407180264644570744noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-2399872815067856997.post-9137606258354584972012-08-09T16:29:20.758-04:002012-08-09T16:29:20.758-04:00Thanks for the reply. I really appreciate it!Thanks for the reply. I really appreciate it!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2399872815067856997.post-3764067196198584802012-08-09T08:25:46.997-04:002012-08-09T08:25:46.997-04:00The first thing to notice is that there are two pa...The first thing to notice is that there are two pairs -- one positively leveraged and one negatively leveraged ETF with the same underlying index -- of leveraged ETFs being closed: (COWL and COWS) and (BRIL and BRIS). Closing in pairs makes sense intuitively since there is likely a some savings of hedging costs when offering paired leveraged ETFs. Beyond these pairs, only inverse leveraged (-3x) ETFs are closing. <br /><br />The reason Direxion could be focusing on closing these unpaired funds is that the hedging costs may be particularly high. Henderson and Seguin showed that the hedging cost for (-3x) leveraged ETFs is higher than that of (3x) leveraged ETFs. See the following paper for more information: <br /><br />http://www.terry.uga.edu/finance/docs/seguin-hedging.pdf<br /><br />Of course, this is probably also a function of Direxion's LETF line-up. Of the 49 LETFs currently offered by Direxion, only three ETFs offer a leverage amount other than (3x) or (-3x): SAGG, TYBS and TYNS.Tim Dulaney, PhD, FRMhttps://www.blogger.com/profile/12059688533088005848noreply@blogger.comtag:blogger.com,1999:blog-2399872815067856997.post-17966612329626136682012-08-08T20:39:09.302-04:002012-08-08T20:39:09.302-04:00Dr. Dulaney,
The leverage ratios for all nine fun...Dr. Dulaney,<br /><br />The leverage ratios for all nine funds are either 3 or -3. Do you think there is a reason for that?<br /><br />Thanks!Anonymousnoreply@blogger.com