CEFD +1.5x ETRACS Monthly Pay 1.5X Leveraged Closed-End Fund Index ETN
BULL ETN mild · Issuer ETRACS · Tracks underlying · Listed 2020-06-03
Realized vs theoretical +1.5x underlying
Cumulative return of CEFD against a clean +1.5x of underlying's return over the same window; the red line (right axis) is the gap between them.
How CEFD works
CEFD targets +1.5x the daily return of underlying — not the return over longer windows. It rebalances every day, so over weeks and months its result drifts away from +1.5x × the index, usually downward when the market chops around.
The maths: the drag is roughly −½ × N × (N−1) × σ² per period (N = leverage, σ = the index's volatility). For a +1.5x fund on an index with 25% annual volatility that is several percent a year before fees — the red line above is that drag measured.
Short-term trades (a day or a few) are what these funds are built for. Premium sellers like their rich option IV — see the quote page. Multi-day directional bets work in strong trends and get eaten in chop.
Not investment advice.