Short & Leveraged ETP Simulator

The downloadable simulator allows you to simulate returns of investing in Short and Leveraged ETPs under various market scenarios. Within the simulator you can simultaneously use the:

  • Market Scenario tool to simulate returns under upward trending, downward trending and volatile market conditions.

  • ETP tool to display your potential returns after taking short or long exposure in markets.

  • Leverage Factor tool to demonstrate the impact on returns of the Short and Leveraged ETP under a range of leverage multiples.

  Download the Short and Leveraged ETP Simulator here

The Compounding Effect

Short and Leveraged ETPs can be held for longer than a day, although your return on them could be more or less than the leverage factor that is embedded within the product. This is because the performance of the Underlying Asset and the Short and Leveraged ETP is reset at the end of each Trading Day. When markets open the next day, the performance of the Underlying Asset and the Short and Leveraged ETP will be measured from the closing levels recorded the Trading Day before. In practice the performance each day is locked in, and any subsequent returns are based on what was achieved the day before. This is a process referred to as compounding.


In order to demonstrate the implications of compounding, we will look at an illustrative example based on 5UKL, a Daily Long on the FTSE 100 TR Index. For example, if 5UKL was worth £100 at the start of day one, and at the market close it was up 5%, it would close at £105, a gain of £5.00. The next day it starts again from £105. By the end of the day it has gained another 5%. However, this time the 5% gain is applied to £105, which gives us a return of £5.25 and a closing price of £110.25. Although the product gained 5% on both day 1 and day 2, it was up by 10.25% over two days. By reversing this scenario we can demonstrate how the compounding effect can work if the product falls in value. If over the period of two days, the value of the FTSE 100 TR Index falls by 5% on day one and a further 5% on day two, then the compounded performance of 5UKL would be -9.75%. This is because although you lose 5% on both days, the second day the 5% loss is actually applied to a value of £95, which only equates to a £4.75 drop in value.