UltraShort 20 Yr Treasury ETF (TBT) performance simulator
May 9th, 2011 | Published in ETFs | 10 Comments
What the simulator does
The levered ETF performance simulator allows you to see how the performance of holding onto a levered short ETF past 1 day is different from shorting the underlying with leverage for any historical period you select.
Layout
The top graph shows the the underlying index of the levered ETF, which for the case of TBT is the Barclay’s 20+ Yr Treasury Index. This is the index for which the levered ETF promises you a multiple of the daily returns. The second graph shows the simulated performance of the Levered ETF (TBT) and the performance of shorting the underlying with 2x leverage yourself. These simulations DO NOT take into account management fees and interest expenses for the ETFs, which can be significant. The metrics above the charts show the % return in the underlying, the % return from the Levered ETF, the % return from shorting the underying with leverage, the % under/out performance of the levered ETF, all for the selected time period.
Operations
You can change the selected time period by clicking and dragging a region horizontally on the graph for the underlying. When you do this, the chart of the underlying will zoom in to your selection, while the chart below will recalculate the returns from the holding the levered ETF and from shorting the underlying with leverage. You can pan by holding onto the shift key while clicking and dragging. Clicking on the graph on the underlying twice to zoom out to the original level.
Zoom: click-drag horizontal
Pan: shift-click-drag
Restore zoom level: double-click
Sample scenarios:
3.2% underperformance by levered ETF in the past 6 months10.5% underperformance by levered ETF
7.1% outperformance by levered ETF
To understand what drives the difference in performance of holding a levered ETF past one day and levering the underlying on your own, see our previous posts on TBT:
Investors in levered short treasury ETFs may be setting themselves up for disaster: Part 1
Investors in levered short treasury ETFs may be setting themselves up for disaster: Part 2
Some related posts by bloggers:
The mechanics of levered ETFs, by Kid Dynamite
The harm of ETFs, by Felix Salmon
May 9th, 2011 at 10:21 pm (#)
thats really cool
May 10th, 2011 at 1:32 am (#)
[...] UltraShort 20 Yr Treasury ETF (TBT) performance simulator — Symmetric Info [...]
May 10th, 2011 at 12:54 pm (#)
[...] UltraShort 20 Yr Treasury ETF (TBT) performance simulator … [...]
May 10th, 2011 at 2:46 pm (#)
[...] A neat performance simulator comparing shorting bonds with leverage vs. a leveraged short bond ETF. (SymmetricInfo) [...]
May 10th, 2011 at 5:40 pm (#)
[...] – A new toy for Bill Gross: the UltraShort 20 Yr Treasury ETF (TBT) performance simulator. [...]
May 10th, 2011 at 7:49 pm (#)
C’mon guys. Leveraged ETFs are not for holding over long periods, the reason is that they are in some way short gamma. If the underlying makes 10% and then -9% (so the underlying comes back where it was), then the leveraged will lose 20% and then make 18%, which net loses 5.5%.
So looking at leveraged ETF will look bad, expect if the underlying really trends.
Cheers.
May 10th, 2011 at 8:02 pm (#)
Hi David,
That is correct that holding a levered ETF past a day is similar to being short gamma. As you can see from our previous post, it appears that investors in inverse treasury ETFs (e.g TBT) are holding them for long periods of time. This simulator aims to drive home the point that these are complex products if held longer for one day.
Best,
May 10th, 2011 at 8:06 pm (#)
Hi David,
That is correct that holding a levered ETF past a day is similar to being short gamma. As you can see from our previous post, it appears that investors in inverse treasury ETFs (e.g TBT) are holding them for long periods of time. This simulator aims to drive home the point that these are complex products if held longer for one day.
Best,
May 11th, 2011 at 7:07 pm (#)
[...] UltraShort 20 Yr Treasury ETF (TBT) performance simulator … [...]
November 11th, 2011 at 7:53 pm (#)
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