This blog is about data analytics, statistics, economics, and investment issues. The "Warp" in the title refers to the nonlinear nature of investment instrument variations.
The figure below shows the performance of two funds: the iShares Russell 2000 ETF (IWM), and the Direxion Daily Small Cap Bear 3X Shares (TZA). The TZA is expected to return 3 times the inverse of the IWM within very short time frames. As you can see, over 6 months the IWM drops -15.41% and the TZA gains 30.63%.
Three times the inverse of -15.41% is 46.23%. Since the TZA gained only 30.63%, the difference of 15.60% (46.23% minus 30.63% = 15.60%) is the decay associated with the 6-month period.
You can do similar estimations for other inverse leveraged funds. The video linked below discusses this and a few other options.
