DFEN +3x Direxion Daily Aerospace & Defense Bull 3X ETF
BULL ETF extreme · Issuer Direxion · Tracks Aerospace & Defense (ITA) · Listed 2017-05-03
Realized vs theoretical +3x Aerospace & Defense
Cumulative return of DFEN against a clean +3x of Aerospace & Defense's return over the same window; the red line (right axis) is the gap between them.
How DFEN works
DFEN targets +3x the daily return of Aerospace & Defense — not the return over longer windows. It rebalances every day, so over weeks and months its result drifts away from +3x × 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 +3x 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.