Archive for the ‘QLeverageSim’ Category

Pullback Visualization

October 5th, 2009 Kevin Comments off

Bill Luby (Vix and More) recently wrote a good post about pullbacks in the 2009 bull market. He includes a table showing the pullback amounts and percentages. Rather than look at raw data, a chart of the pullbacks can be seen by using QLeverageSim’s drawdown feature. Astute readers may notice the values in QLeverageSim are slightly different. The reason is because Bill’s data includes intraday highs and lows while QLeverageSim does not. Here is a chart of the 2009 bull market pullbacks using SPY for the data source.

To put the most recent pullback (4.3%) in perspective, here is a chart of all pullbacks in the 2003-2007 bull market:

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QLeverageSim 1.3 Released

September 16th, 2009 Kevin Comments off

I spent a few hours this past weekend adding a few features to QLeverageSim (which is free). The new features will eventually be covered in more detail on this blog and a user manual still needs to be written, but until then there is an overview of the new features below.  This is the list of changes:

ADDED: Decay indicator with configurable history
ADDED: Leverage Factor chart
ADDED: An icon for the software
ADDED: Index RSI estimation chart
ADDED: Drawdown chart (for leveraged ETF and estimation of index’s drawdown)
ADDED: Ability to ‘append’ the visible data to the end of a symbol’s data cache (explained below)
ADDED: Checkboxes to show/hide chart series (future versions will remember settings)
ADDED: EEM, UPRO, SPXU to the symbol list
CHANGED: Data is now downloaded from Yahoo Finance
CHANGED: Adjusted Close data is now used (now FAS/FAZ finally work)
FIXED: Series Leverage % label was sometimes wrong.

Click here for the download page. (Requires .NET 3.5 SP1)

Decay Indicator

This feature deserves a blog entry of its own (and it will get one eventually). Rather than show a chart of total decay for the visible data, there is now a configurable indicator that shows the amount of decay over a particular history. For example, a chart of FAS with a 20 day decay indicator shows how FAS was decaying at about 15-20% per month in January through April, but since June it has been decaying at about 1-2% per month. The decay has reduced significantly due to the lack of volatility relative to earlier this year.

A decay measurement can be conceptualized as an approximation of “the amount of loss a leveraged ETF would experience if the underlying index is flat.” In the FAS chart, the ETF has been having significant gains since the index has been gaining significantly. However, if the index were to be flat over a 20 day period, FAS would have experienced roughly a 2% drop. The decay indicator is purely historical and is not intended to be used as a future indicator of performance. Decay is effectively another representation of historical daily volatility.

Leverage Factor Chart

It been covered on numerous blogs and articles how compounding in leveraged ETFs can work to a trader’s advantage during upward trends with low volatility. What ends up happening during these strong uptrends is that compounding can make a leveraged ETF outperform its daily leverage target. Using FAS as another example, since the March bottom there has been enough upward movement in the index such that FAS has gained at a multiple of roughly 4.42x of the underlying index. QLeverageSim’s Leverage chart shows the progress of the leveraged ETF’s leverage factor. It also works for simulations using SPY, IWM, XLF, etc. Try those and see the incredible leverage factors during bull markets.

Drawdown Chart

To make it a bit easier to visualize pullbacks and potential entry points, a chart of the drawdown % of both the leveraged ETF and the index (estimation) can be displayed. Here is a chart that shows the pullbacks in TNA and its underlying Russell 2000 index.

Data Appending

This feature could be somewhat controversial and potentially dangerous, but I like the capabilities that it provides. Basically the feature allows the performance data of the currently visible chart to be appended to the end of the current symbol’s data. As an example, consider a trader who wants to simulate what might happen to SPY if we were to experience another drop in the market similar to the last bear drop in 2002. To do this, a user would display the region they want to copy for appending and then click Edit-Append Visible Data.

Once the data is appended, their SPY chart will contain the same performance characteristics of the 2002 drop at the end of their most recent data.

Another potential use of ‘appending’ is to approximate the kind of market activity that would be required to result in RSI’s reaching a particular value. A less sophisticated trader looking to sell when RSI reaches 70 might try appending/resetting data to see what kind of future data would be required to reach their target value. This technique is certainly not recommended, but since all indicators and values are updated accordingly with the appended data, the feature does allow for traders to ‘play’ with market data to see how past performance applied to the future would affect the resulting values of leveraged ETFs and indicators. As a warning, since RSI is dependent on both time and strength, there is no guarantee that a particular ETF value in the future will result in a particular RSI value. It depends on the ETF’s path to that point.


What does QLeverageSim do?
QLeverageSim is a basic (free) utility that can simulate leveraged ETFs from historical data of 1x ETFs. It also displays other information and indicators such as amount of decay, drawdown, effective leverage, gains, and RSI.

Does QLeverageSim make trade suggestions or place trades?
No. QLeverageSim is for simulations and analysis of historical data only.

What is the purpose of QLeverageSim?
QLeverageSim was designed for the sole purpose of helping traders understand the characteristics of leveraged ETFs in a variety of different market scenarios such as trending up, trending down, sideways, volatile, calm, bull and bear.

Who should use QLeverageSim?
Traders and investors who want to understand the performance characteristics of swing trading or long term investing in leveraged ETFs.

How accurate are the simulations and calculations?
Nearly all calculations could be done in excel and give the same results. However, no simulation or calculation includes transaction fees, costs, or taxes.

How much does QLeverageSim cost?
It is free.

Who wrote the QLeverageSim software?
Kevin Kerr (me) over the course of several weekends.

What is needed to run QLeverageSim software?
A windows PC with .NET Framework 3.5 SP1 installed.

Where does QLeverageSim get its data?

Is there a user manual or guide that explains the various indicators and charts?
A user manual will be written eventually, but currently one does not exist. The decay calculations are best described in the Measuring Leveraged ETF Decay article. Any questions or comments can be sent to my first name (Kevin) at

QLeverageSim 1.2 Released

July 29th, 2009 Kevin Comments off

It is a minor update to to utility, but something is better than nothing. Click here for the QLeverageSim page.

ADDED: Simulator for custom volatility and decay simulations
FIXED: Symbols are now now properly refreshed when update is clicked

The simulator can be useful for approximating the kind of decay that may result from various scenarios. For example, a hypothetical perfect 3x ETF tracking the S&P500 over the course of 250 trading days with 0.8% day to day volatility would experience roughly 5% decay. So if the S&P were up 5% for the year, the 3x ETF would be up roughly 10% (5 * 3 = 15%, -5% decay). The usual disclaimer applies (this example is purely hypothetical, it is just a simulation which does not guarantee real world results, and it does not include fund fees, expenses, taxes, etc).

I will cover more about simulations in the future.