Title page for ETD etd-111609-083627

Document Type	thesis
Author Name	Posterro, Barry John
URN	etd-111609-083627
Title	Explorations of Trading Strategies for Leveraged Exchange-Traded Funds
Degree	MS
Department	Mathematical Sciences
Advisors	Marcel Blais, Advisor
Keywords	exchange-traded fund ETF leverage FAS FAZ bootstrap
Date of Presentation/Defense	2009-11-16
Availability	unrestricted
Abstract This paper describes our work in exploring trading strategies for the leveraged exchange-traded funds, Direxion Daily Financial Bull 3X (FAS) and Direxion Daily Financial Bear 3X (FAZ) over the first three quarters of 2009. Using minute-by-minute stock data we are able to verify the accuracy of these ETFs in regards to their target of the Russell 1000 Financial Index (RIFIN). We are then able to quantify the returns and risks involved with trading strategies that seek to exploit the ETFs objectives, specifically momentum trades, tracking-error discrepancy trades, and a combination of the two strategies we term “discount-and-up.” Bootstrap simulation techniques are employed to measure values at risk and conditional tail expectations over 30 day time horizons for each strategy. Lastly, we demonstrate the dangers of traditional buy-and-hold investing with regards to leveraged ETFs.
Files	Posterro_2009_Financial_Math.pdf

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