Question 1:
We all know that TQQQ is a triple leveraged ETF of QQQ. So if you buy one share of TQQQ, how many shares of QQQ are you essentially buying? In other words, if you buy x shares of TQQQ and y shares of QQQ, what should the ratio of x to y be in order to achieve the same profit/loss?
If your answer is 3, then you have made a mistake. Understanding the leverage ratio is crucial for leveraged ETFs.
Currently, the price of QQQ is 426 and TQQQ is 56. The ratio of their percentage changes is three times, which means if QQQ goes up by 1%, TQQQ goes up by 3%. The actual price change is QQQ up 4.26 and TQQQ up 1.68. Calculating that 4.26/1.68 = 2.5, it means you need to buy 2.5 shares of TQQQ to catch the same price increase as 1 share of QQQ.
Question 2:
What is the capital utilization rate?
From the above question, it can be seen that in the case of the same profit, the ratio of shares between qqq and tqqq is 1:2.5, requiring an investment of 426:140 = 3. So everyone should realize that the triple leverage is based on funds rather than shares. At this point, the results are very intuitive, next we will discuss the issue of options.
The current month's options call side atm price for qqq:tqqq = 9.2:3.4 = 2.7. The result we obtained in question 1 is 2.5, which is very close, indicating that the share leverage ratio also exists for options.
How to choose:
1....