by Steve Auger

So what happens when one buys both long and short leveraged ETFs at the same time?  Let's find out.  Below are some buy and hold examples.  (Sorry about the plain Jane graphs).  Equal $ value of long and short ETFs are bought and held.  The left axis is total dollar value normalized to $100 at start.  The bottom axis is months held.

So the results look OK but not spectacular.  Now let's see what happens when the holdings are rebalanced at the end of each month.

 Not too shabby!!!  These graphs show fairly smooth degradation almost every month for every instrument examined.  This is great but not a trading system (yet).

We still have to figure out how to trade this phenomenon and diversify the holdings.  But that will have to wait until next time.