[sgbuffett]

I have been spending last 2 weeks modelling and simulating these products to get q better understanding.

My conclusion is these qre extremely useful products for certain market conditions. 

In the video the concept of optional stopping theorem is jntroducted. By modelling the market as a random stoicastic process it leads to a few interesting characterisation of the leveraged etf....and how it can be used.

1. While the 2x and 3x is designed to track daily returns  The annual return is 2x or 3x of the underlying.

2. If you watch the video, the long term returns of a 3x or 2x leverage of ETF is much higher than 3x and 2x. The reason for this is market has a non zero expectation and this is amplified and compounded over time.

3. You make big and lose big depending on your entry point. If you enter before a big crash, the leverage etf will never recover back even if the underlying recover back to above the level before crash.

I did many runs ....and basically you can .asking alot if you wait for a crash and enter near the bottom using these products. During normal times u should avoid. If you believe q crash is coming you can buy the inverse leveraged products. But crashes in general are harder to predict than post crash recovery.

[sgbuffett]

Just to add many traders like to use these for short term trades but the mathematics show the short term move distribution is more random. Hence it is gambling using leverage.

My interest is more in longer term use of these. And how to use it with minimal risk ...