Daily Price Drift in Leveraged and Inverse WTI ETNs

Summary

This document asks why a leveraged WTI exchange-traded note and its inverse counterpart appear to trace different slopes during large price moves. One note is described as providing leveraged long exposure and the other as leveraged inverse exposure. The author plots daily closing prices on logarithmic axes, marks intervals of visually significant movement, and observes an apparent overall tendency toward the origin. Upward intervals for the long product and downward intervals for the inverse product are highlighted separately.

The post does not give a causal explanation, calculation, or statistical test. It also omits days judged visually insignificant, and the interval selection is based on visual inspection rather than a stated threshold. The plotted pattern therefore raises a question about leveraged product behavior but does not establish its source or generality. The document provides no basis for inferring a trading rule or expected return from the observed slopes alone.

Key ideas

• The document compares a leveraged WTI ETN with an inverse leveraged WTI ETN.
• It describes plotting daily closing prices on log scales and highlighting large moves.
• The author observes different slopes across upward and downward intervals.
• Intervals are selected visually, while days with no significant-looking move are omitted.
• No explanation or quantitative validation of the pattern is provided.

Tags

# Why do leveraged and inverse leveraged WTI ETNs have this price relationship?


# Why do leveraged and inverse leveraged WTI ETNs have this price relationship?












UWTI: 3x leveraged exposure to WTI

DWTI: 3x leveraged inverse exposure to WTI

The inverse relationship between these two symbols seems to trend toward the origin on a log-log plot (using log base 2). I'm plotting only intervals of large movement, so not all days are shown. Green intervals are ones where UWTI goes up. Red intervals are ones where DWTI goes down.

Question: Why do green and red intervals have consistently different slopes that make the overall trend toward the origin (see blue arrow)?

Note: Large movement was determined visually, from the bottom to the top (or vice versa) of intervals of significant price change. The days that are not represented at all in this graph had no visually significant movement. Graph is based on daily close prices.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.