Ask HN: What was your best passive income in 2016?

Re:Ask HN: What was your best passive income in 2016? by amag on Sunday December 11, 2016 @03:17PM (#13152943)

So what happens to UWTI when the price of oil falls 1% and to DWTI when it rises 1%?

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Re:Ask HN: What was your best passive income in 2016? by gaurav-gupta on Sunday December 11, 2016 @08:59PM (#13154948)

They'll move 3x. When oil falls 1%, UWTI rises 3% and DWTI falls 3%. That's good for a short term bet if it goes your way. In the long term it corrodes the value.

Lets say UWTI is trading at 100 today. Oil is trading at 50.

Day1: Oil falls 47.5 (5% drop). UWTI will fall to -> 100 * ( 1 - 3 * 0.05) = 85

Day2: Oil rises back to 50 (5.26 % rise). UWTI will rise to -> 85 (1+ 3 * 0.0526) = 98.42

So even though oil price recovered, you lost $1.58. Over a period of time, rise and fall in oil prices corrodes the value of UWTI & DWTI (and similar leveraged ETFs)

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