A friend recently wrote me about a strategy he heard for exploiting market volatility. Â I get these questions sometimes because I’m in finance, and because I’m in finance let me be up front. Â I’m not giving you financial advice here. Â I’m not an advisor, I’m not competent, you should probably close this page now and burn your computer. Â Past performance has no correllation with future performance, as everyone should have learned in, oh, 2008.
That said, let’s have a little fun with these ideas. Â To paraphrase my pal’s email:
Apologies in advance for what I hope is a not-too-complicated financial question. So you ever heard of something called volatility drag? Something to do with how over time double- and triple-leveraged ETFs always lose money. I found an investment opportunity that uses this principle to make money.  The pitch I heard says that the strategy is sound and has data to back it up since the 90s.  I find it hard to believe that something that automatically mints you money (admittedly at a “watching paint dry” pace) exists, yet it seems so from what I can tell…
I hadn’t heard of volatility drag before but it was fun to learn about. Â Under the fold: Â Charts! Definitions! Sage Advice! Links to books!
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