Leverage Shares 3x Tesla ETP

Anyone else invested in 3x Tesla ETP? Supposedly if tesla goes up then this should be up 3 times as much… well not from what im seeing:

Look at the scale (price) on the right. The Tesla chart at the top goes from 220 to 290 (ie about 40% range top to bottom) whereas the bottom chart goes from 20 to 52 (ie about 260%). However, the leveraged products have overnight interest and fees and the x3 effect can reduce the returns (below x3) because of the overnight calculations (the website for the products explains)

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@gsxr1paul You’re lucky you didn’t lose most of it. YOU MUST USE STOP-LOSSES

You’ve misunderstood how these things work, ( if this one is the same as all the others I’ve looked at).

It’s absolutely NOT 3x the tesla price.
It’s a DAILY reflection of the change in the Tesla price. Within the day, but it’s not anchored. Pull up some screens and check, they vary.
If Tesla goes up 1%, the ETP goes up 3%, yes
Tesla goes to 99%, ETP goes to 97% still ok.

Start again at $100 worth of shares… Tesla price 100.
Reflect on -30%, followed by +50%
Tesla goes to 70, ETP goes to 10 It would probably be a shock to lose 90% of your money.
Tesla goes back up to 105 (+50%), ETP goes to 25 (+150%)

(Interesting to try the SHORT 3x version. 100 ->190 → 0. Heads they will, tails you lose.)

Over a long period, you get accumulating daily charges and forex variations too.

If you’re confident on how Tesla will go, you’d be better off with a CFD. But then you get 0.1% swap (overnight) charge
but, big thing, you can at least set a trailing stop loss. Unless it fails of course - they do that if the price gaps down.

Also, it the ETP is wiped out, that’s all you lose. But if the CFD crashes, you could lose your whole pot across all CFD positions.

T212 would prevent it getting quite to zero, probably. I haven’t tested that yet.

If you’d used stop-losses, you would have stood a chance of harvesting the winning periods, and not suffering (much) in the losing days.
The spread on the ETPs is quite wide, and you have to give a little wiggle room above your stop, so there would still be a hit.
BUt you wouldn’t buy when the stock was falling, would you. If times get choppy, find something more stable, or at least revert to the base stock…

Or sit and watch , and try to jump in and out of leveraged stocks or CFDs to make the best of the moment. Trouble is, you would probably do like most others and lose trying to time it, after spreads are taken into account as well.

Caveat: these ETPs should really only be held for a short time, ideally daily.

Directionally, these ETPs work as designed when trading momentum:

  1. Tesla in your chart declined approx 24% from $290 to $220 in a fairly clear negative downtrend.

The 3x ETP in this same period declined approx 62% from $52 to $20.

3 times 24% = 72% which isn’t far off 62% delivered by the ETP.

  1. Tesla in your chart climbed approx 23% from $220 to $270 in a fairly clear positive uptrend.

The 3x ETP in this same period climbed approx 70% from $20 to $34.

3 times 23% = 69% which isn’t far off 70% delivered by the ETP.

The differences are generally due to fees and compound effects of holding longer than a day. As explained by a different post, if you hold these ETPs outside of clear directionally consistent up or down trends i.e. over timeframes of random / choppy volatility you will not get the simple 3x multiplier of that periods performance.

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