Daily Leverage Certificates (DLC) – What you need to know about this newly listed financial instrument

Daily Leverage Certificates (DLC) – What you need to know about this newly listed… https://t.co/JCnuJHMbbd

The underlying asset changes 0.38% in value today. The DLC’s return will be impacted by leverage so if it is a 3X leverage, then the intraday return of a Long DLC is -(-0.38) x 3 = 1.14%. The next day, the underlying asset changes in value by 1%. The same DLC will rise in value by -(1.00) x 3 = -3%. Over 2 days, the DLC has moved up 1.14% and 3% which results in a 2 day total return of 4.44% while the underlying index moved up a total of 1.47% over two days. The Long DLC’s return is thus slightly higher than 3 times 1.47% or 4.41%, which is due to the compounding effect.

Full article: http://investmentmoats.com/uncategorized/daily-leverage-c...