[LEVERAGED ETFS] Ja

Leveraged ETFs
First of Month Trading Analysis

19-Jan-11
Po Pimp
 [LEVERAGED ETFS] January 19, 2011

Introduction
It has been widely mentioned that the market makes a significant amount of its overall gains on the
first trading day of each month. The thesis is one could trade just the first day of the month and
capture most of the market’s yearly gains. A big advantage to this strategy is it minimizes the
amount of time capital is invested in the market. Capital can then be used throughout the rest of
the month for other trades.

The purpose of this report is to examine the performance of various leveraged ETFs using a “First of
the Month” trading strategy. Since this is by nature a very risky strategy the main focus of the report
is on ETFs that are expected to produce the largest gains; the most liquid 3x leveraged ETFs. The
ETFs of interest include:

Table 1: List of ETFs Analyzed

Symbol Description
EDC Direxion Daily Emerging Markets Bull 3X Shares
ERX Direxion Daily Energy Bull 3X Shares
FAS Direxion Daily Financial Bull 3X Shares
TNA Direxion Daily Small Cap Bull 3X Shares
BGU Direxion Daily Large Cap Bull 3X Shares
DRN Direxion Daily Real Estate Bull 3X Shares
TYH Direxion Daily Technology Bull 3X Shares

Methodology
Historical data for each ETF was downloaded from Yahoo! Finance. An original high-level analysis
was carried out in which the closing price of the last day of a month was used as the buy price and
the closing price of the first session of the next month was used as the sell price. In general terms
this equates to a one-day hold strategy. This first analysis covered the timeframe from 31 December
2009 to 3 January 2010.

However, early in the analysis it was observed that returns could be further optimized with one
simple change. The ETFs can be held until the first day that the closing price is equal to or higher
than the buy price. In other words the revised strategy completely eliminates losses*. Returns from
each month were compounded. The revised strategy covered a longer period, 31 December 2008 –
3 January 2010. It is noted that DRN data is only available from 31 July 2009 to present for analysis.
Finally, the “Adjusted Close” values reported by Yahoo! Finance were used in all price calculations
for consistency.

In order to quantify the efficiency of the revised strategy, all occurrences of trades requiring more
than one day are noted by the number of days required to reach the buy price. Efficiency is deemed
greater if the number of days holding an ETF is lower.

*
Slippage and commissions are not accounted for in the analysis.
 [LEVERAGED ETFS] January 19, 2011

Efficiency is defined with the following equation:

Figure 1: Efficiency Equation

‫݈݀݁ܪ ݏݕܽܦ‬
ߝ =1−൬ ൰ ܺ 100
ܶ‫ݏݕܽܦ ݈ܽݐ݋‬

Where:

Days Held ≡ Number of days the ETF was held throughout the analysis
Total Days ≡ Calendar days available throughout the analysis

The following table presents a summary of each ETF’s performance over the analysis period. Again,
DRN is subject to a shorter evaluation period as noted previously.

Table 2: Analysis Summary

Compounded Average Return Median Return

Symbol Return* (Monthly) (Monthly) Efficiency
EDC 349% 6.36% 5.07% 94.8%
ERX 278% 5.73% 4.94% 93.4%
FAS 240% 5.28% 4.59% 91.4%
TNA 193% 4.67% 4.58% 92.9%
BGU 150% 4.06% 3.20% 93.6%
DRN 92% 3.88% 2.99% 90.9%
TYH 158% 4.06% 3.46% 93.7%

* Compounded return based on an arbitrary starting capital amount of $5,000. Larger starting capital results in higher compounded
gains.

The compounded return is based on the ‘ROUNDDOWN()’ function in Microsoft Excel to determine
the largest number of full shares that could be purchased each month. Thus not 100% of available
capital will be used in the month’s analysis. This helps explain the difference between theoretical
returns and the calculated returns shown in the above table.

As shown above, all the ETFs produce stellar compounded returns. However EDC, ERX, FAS, and TNA
provide the best results overall and on an average / median basis. If one were to embark on utilizing
a limited “First of the Month” leveraged ETF trading strategy then one of those four ETFs should be
given highest preference. From all the above metrics it appears EDC is the best ETF for this type of
trading strategy.

*
Slippage and commissions are not accounted for in the analysis.
 [LEVERAGED ETFS] January 19, 2011

Individual ETF Performance

Table 3: EDC Performance

Symbol EDC Starting capital $5,000

Buy Sell % Gain Days Shares bought Sold value

Jan-09 10.92 12.56 15.02% 1 457 $ 5,739.92
Feb-09 7.58 8.04 6.07% 2 757 $ 6,086.28
Mar-09 6.31 6.63 5.07% 7 964 $ 6,391.32
Apr-09 8.50 9.39 10.47% 1 751 $ 7,051.89
May-09 12.68 13.28 4.73% 1 556 $ 7,383.68
Jun-09 18.83 21.36 13.44% 1 392 $ 8,373.12
Jul-09 17.07 17.82 4.39% 1 490 $ 8,731.80
Aug-09 22.64 25.19 11.26% 1 385 $ 9,698.15
Sep-09 21.57 22.24 3.11% 3 449 $ 9,985.76
Oct-09 28.74 29.65 3.17% 4 347 $ 10,288.55
Nov-09 25.23 25.94 2.81% 1 407 $ 10,557.58
Dec-09 30.93 33.43 8.08% 1 341 $ 11,399.63
Jan-10 33.37 36.32 8.84% 1 341 $ 12,385.12
Feb-10 25.70 27.68 7.70% 1 481 $ 13,314.08
Mar-10 26.67 27.93 4.72% 1 499 $ 13,937.07
Apr-10 32.84 35.12 6.94% 1 424 $ 14,890.88
May-10 32.20 32.53 1.02% 1 462 $ 15,028.86
Jun-10 22.63 23.61 4.33% 2 664 $ 15,677.04
Jul-10 21.05 21.38 1.57% 1 744 $ 15,906.72
Aug-10 28.05 30.23 7.77% 1 567 $ 17,140.41
Sep-10 25.16 27.68 10.02% 1 681 $ 18,850.08
Oct-10 34.62 36.13 4.36% 1 544 $ 19,654.72
Nov-10 37.40 38.58 3.16% 1 525 $ 20,254.50
Dec-10 33.80 36.55 8.14% 1 599 $ 21,893.45
Jan-11 41.31 42.43 2.71% 1 529 $ 22,445.47

Average return 6.36% Total days 730

Median return 5.07% Days held 38
Compounded Return 348.9% Efficiency 94.8%
 [LEVERAGED ETFS] January 19, 2011

Table 4: ERX Performance

Symbol ERX Starting capital $5,000

Buy Sell % Gain Days Shares bought Sold value

Jan-09 38.30 43.95 14.75% 1 130 $ 5,713.50
Feb-09 33.79 33.97 0.53% 2 169 $ 5,740.93
Mar-09 22.04 24.11 9.39% 12 260 $ 6,268.60
Apr-09 22.50 23.86 6.04% 1 278 $ 6,633.08
May-09 26.24 28.61 9.03% 1 252 $ 7,209.72
Jun-09 35.31 38.93 10.25% 1 204 $ 7,941.72
Jul-09 28.88 29.01 0.45% 1 274 $ 7,948.74
Aug-09 32.46 34.99 7.79% 1 244 $ 8,537.56
Sep-09 32.91 35.39 7.54% 5 259 $ 9,166.01
Oct-09 38.67 40.09 3.67% 4 237 $ 9,501.33
Nov-09 41.36 41.69 0.80% 1 229 $ 9,547.01
Dec-09 38.78 40.29 3.89% 1 246 $ 9,911.34
Jan-10 39.26 42.74 8.86% 1 252 $ 10,770.48
Feb-10 33.77 36.94 9.39% 1 318 $ 11,746.92
Mar-10 35.83 36.79 2.68% 1 327 $ 12,030.33
Apr-10 38.83 40.75 4.94% 1 309 $ 12,591.75
May-10 43.96 45.27 2.98% 1 286 $ 12,947.22
Jun-10 29.47 30.11 2.17% 3 439 $ 13,218.29
Jul-10 23.63 23.94 1.31% 3 559 $ 13,382.46
Aug-10 29.60 32.67 10.37% 1 452 $ 14,766.84
Sep-10 25.38 28.12 10.80% 1 581 $ 16,337.72
Oct-10 33.04 34.27 3.72% 1 494 $ 16,929.38
Nov-10 38.28 38.70 1.10% 1 442 $ 17,105.40
Dec-10 45.05 48.82 8.37% 1 379 $ 18,502.78
Jan-11 58.45 59.83 2.36% 1 316 $ 18,906.28

Average return 5.73% Total days 730

Median return 4.94% Days held 48
Compound Return 278% Efficiency 93.4%
 [LEVERAGED ETFS] January 19, 2011

Table 5: FAS Performance

Symbol FAS Starting capital $5,000

Buy Sell % Gain Days Shares bought Sold value

Jan-09 42.08 42.78 1.66% 1 118 $ 5,048.04
Feb-09 15.15 17.70 16.83% 5 333 $ 5,894.10
Mar-09 8.10 8.34 2.96% 9 727 $ 6,063.18
Apr-09 9.11 9.84 8.01% 1 665 $ 6,543.60
May-09 13.46 16.43 22.07% 2 486 $ 7,984.98
Jun-09 16.56 17.32 4.59% 1 482 $ 8,348.24
Jul-09 15.32 16.09 5.03% 10 544 $ 8,752.96
Aug-09 19.09 20.60 7.91% 1 458 $ 9,434.80
Sep-09 26.25 26.39 0.53% 9 359 $ 9,474.01
Oct-09 27.29 27.72 1.58% 5 347 $ 9,618.84
Nov-09 22.46 22.88 1.87% 1 428 $ 9,792.64
Dec-09 25.07 25.26 0.76% 1 390 $ 9,851.40
Jan-10 24.63 25.89 5.12% 1 399 $ 10,330.11
Feb-10 23.06 24.07 4.38% 1 447 $ 10,759.29
Mar-10 24.91 25.19 1.12% 1 431 $ 10,856.89
Apr-10 32.16 32.94 2.43% 1 337 $ 11,100.78
May-10 33.65 35.28 4.84% 1 329 $ 11,607.12
Jun-10 24.14 24.42 1.16% 2 480 $ 11,721.60
Jul-10 19.09 20.58 7.81% 4 614 $ 12,636.12
Aug-10 22.61 24.12 6.68% 1 558 $ 13,458.96
Sep-10 17.90 19.86 10.95% 1 751 $ 14,914.86
Oct-10 21.34 21.82 2.25% 1 698 $ 15,230.36
Nov-10 22.18 22.20 0.09% 1 686 $ 15,229.20
Dec-10 21.40 22.62 5.70% 1 711 $ 16,082.82
Jan-11 27.84 29.44 5.75% 1 577 $ 16,986.88

Average return 5.28% Total days 730

Median return 4.59% Days held 63
Compound Return 240% Efficiency 91.4%
 [LEVERAGED ETFS] January 19, 2011

Table 6: TNA Performance

Symbol TNA Starting capital $5,000

Buy Sell % Gain Days Shares bought Sold value

Jan-09 29.95 31.55 5.34% 1 166 $ 5,237.30
Feb-09 20.79 21.38 2.84% 1 251 $ 5,366.38
Mar-09 13.64 14.10 3.37% 12 393 $ 5,541.30
Apr-09 15.28 16.17 5.82% 1 362 $ 5,853.54
May-09 22.44 22.75 1.38% 1 260 $ 5,915.00
Jun-09 23.77 26.52 11.57% 1 248 $ 6,576.96
Jul-09 24.47 25.70 5.03% 1 268 $ 6,887.60
Aug-09 31.50 33.25 5.56% 1 218 $ 7,248.50
Sep-09 33.98 34.72 2.18% 5 213 $ 7,395.36
Oct-09 39.80 40.46 1.66% 6 185 $ 7,485.10
Nov-09 31.84 33.09 3.93% 2 235 $ 7,776.15
Dec-09 34.31 35.88 4.58% 1 226 $ 8,108.88
Jan-10 42.66 46.06 7.97% 1 190 $ 8,751.40
Feb-10 37.97 39.38 3.71% 1 230 $ 9,057.40
Mar-10 43.16 46.15 6.93% 1 209 $ 9,645.35
Apr-10 54.58 55.95 2.51% 1 176 $ 9,847.20
May-10 63.45 67.69 6.68% 1 155 $ 10,491.95
Jun-10 48.04 49.12 2.25% 3 218 $ 10,708.16
Jul-10 36.46 36.53 0.19% 4 293 $ 10,703.29
Aug-10 43.25 45.31 4.76% 1 247 $ 11,191.57
Sep-10 33.76 37.49 11.05% 1 331 $ 12,409.19
Oct-10 47.06 47.85 1.68% 1 263 $ 12,584.55
Nov-10 52.63 54.84 4.20% 2 239 $ 13,106.76
Dec-10 57.93 61.68 6.47% 1 226 $ 13,939.68
Jan-11 72.43 76.21 5.22% 1 192 $ 14,632.32

Average return 4.67% Total days 730

Median return 4.58% Days held 52
Compound Return 193% Efficiency 92.9%
 [LEVERAGED ETFS] January 19, 2011

Table 7: BGU Performance

Symbol BGU Starting capital $5,000

Buy Sell % Gain Days Shares bought Sold value

Jan-09 35.07 38.50 9.78% 1 142 $ 5,467.00
Feb-09 26.52 27.30 2.94% 2 206 $ 5,623.80
Mar-09 18.35 18.92 3.11% 9 306 $ 5,789.52
Apr-09 21.87 23.18 5.99% 1 264 $ 6,119.52
May-09 28.70 29.27 1.99% 1 213 $ 6,234.51
Jun-09 33.19 35.72 7.62% 1 187 $ 6,679.64
Jul-09 32.95 33.33 1.15% 1 202 $ 6,732.66
Aug-09 40.33 42.33 4.96% 1 166 $ 7,026.78
Sep-09 44.58 45.30 1.62% 5 157 $ 7,112.10
Oct-09 49.64 49.68 0.08% 5 143 $ 7,104.24
Nov-09 45.79 46.74 2.07% 1 155 $ 7,244.70
Dec-09 47.85 49.56 3.57% 1 151 $ 7,483.56
Jan-10 51.14 53.76 5.12% 1 146 $ 7,848.96
Feb-10 45.40 47.56 4.76% 1 172 $ 8,180.32
Mar-10 49.67 51.26 3.20% 1 164 $ 8,406.64
Apr-10 59.34 60.63 2.17% 1 141 $ 8,548.83
May-10 62.33 64.68 3.77% 1 137 $ 8,861.16
Jun-10 47.43 48.23 1.69% 2 186 $ 8,970.78
Jul-10 39.02 42.32 8.46% 4 229 $ 9,691.28
Aug-10 47.31 50.33 6.38% 1 204 $ 10,267.32
Sep-10 41.05 44.48 8.36% 1 250 $ 11,120.00
Oct-10 52.75 53.35 1.14% 1 210 $ 11,203.50
Nov-10 58.96 60.36 2.37% 2 190 $ 11,468.40
Dec-10 58.95 62.69 6.34% 1 194 $ 12,161.86
Jan-11 71.50 73.53 2.84% 1 170 $ 12,500.10

Average return 4.06% Total days 730

Median return 3.20% Days held 47
Compound Return 150% Efficiency 93.6%
 [LEVERAGED ETFS] January 19, 2011

Table 8: DRN Performance

Symbol DRN Starting capital $5,000

Buy Sell % Gain Days Shares bought Sold value

Aug-09 19.23 20.16 4.84% 1 260 $ 5,241.60
Sep-09 27.12 27.54 1.55% 6 193 $ 5,315.22
Oct-09 31.45 32.65 3.82% 10 169 $ 5,517.85
Nov-09 26.17 26.32 0.57% 1 210 $ 5,527.20
Dec-09 28.61 29.84 4.30% 1 193 $ 5,759.12
Jan-10 34.86 35.32 1.32% 4 165 $ 5,827.80
Feb-10 29.08 30.66 5.43% 1 200 $ 6,132.00
Mar-10 33.68 34.39 2.11% 1 182 $ 6,258.98
Apr-10 44.70 45.16 1.03% 1 140 $ 6,322.40
May-10 53.28 58.47 9.74% 1 118 $ 6,899.46
Jun-10 42.51 42.84 0.78% 9 162 $ 6,940.08
Jul-10 34.97 36.10 3.23% 5 198 $ 7,147.80
Aug-10 44.66 49.01 9.74% 1 160 $ 7,841.60
Sep-10 42.28 46.38 9.70% 1 185 $ 8,580.30
Oct-10 47.36 48.00 1.35% 1 181 $ 8,688.00
Nov-10 53.93 55.41 2.74% 1 161 $ 8,921.01
Dec-10 50.07 51.15 2.16% 1 178 $ 9,104.70
Jan-11 56.82 59.89 5.40% 1 160 $ 9,582.40

Average return 3.88% Total days 518

Median return 2.99% Days held 47
Compound Return 92% Efficiency 90.9%
 [LEVERAGED ETFS] January 19, 2011

Table 9: TYH Performance

Symbol TYH Starting capital $5,000

Buy Sell % Gain Days Shares bought Sold value

Jan-09 13.64 15.26 11.88% 1 366 $ 5,585.16
Feb-09 11.98 12.37 3.26% 1 466 $ 5,764.42
Mar-09 10.17 10.48 3.05% 8 566 $ 5,931.68
Apr-09 13.46 14.50 7.73% 1 440 $ 6,380.00
May-09 18.73 19.08 1.87% 1 340 $ 6,487.20
Jun-09 19.97 22.01 10.22% 1 324 $ 7,131.24
Jul-09 22.49 22.82 1.47% 1 317 $ 7,233.94
Aug-09 28.64 29.75 3.88% 1 252 $ 7,497.00
Sep-09 30.44 30.59 0.49% 4 246 $ 7,525.14
Oct-09 34.51 34.65 0.41% 6 218 $ 7,553.70
Nov-09 33.47 33.86 1.17% 1 225 $ 7,618.50
Dec-09 32.97 34.40 4.34% 1 231 $ 7,946.40
Jan-10 39.49 41.37 4.76% 1 201 $ 8,315.37
Feb-10 29.58 30.88 4.39% 1 281 $ 8,677.28
Mar-10 33.74 35.08 3.97% 1 257 $ 9,015.56
Apr-10 39.06 40.41 3.46% 2 230 $ 9,294.30
May-10 41.06 42.75 4.12% 1 226 $ 9,661.50
Jun-10 31.65 32.61 3.03% 2 305 $ 9,946.05
Jul-10 25.00 25.16 0.64% 3 397 $ 9,988.52
Aug-10 30.39 32.35 6.45% 1 328 $ 10,610.80
Sep-10 24.07 25.95 7.81% 1 440 $ 11,418.00
Oct-10 33.67 34.58 2.70% 3 339 $ 11,722.62
Nov-10 40.24 40.66 1.04% 1 291 $ 11,832.06
Dec-10 38.46 40.97 6.53% 1 307 $ 12,577.79
Jan-11 45.50 46.75 2.75% 1 276 $ 12,903.00

Average return 4.06% Total days 730

Median return 3.46% Days held 46
Compound Return 158% Efficiency 93.7%
 [LEVERAGED ETFS] January 19, 2011

Figure 1: EDC Monthly Returns

EDC
16

14

12

10

6 EDC

0
 [LEVERAGED ETFS] January 19, 2011

Figure 2: ERX Monthly Returns

ERX
16
14
12
10
8
6 ERX
4
2
0
Jan-09

Nov-09

Jan-10

Nov-10

Jan-11
May-09

Sep-09

May-10

Sep-10
Jul-09

Jul-10
Mar-09

Mar-10
 [LEVERAGED ETFS] January 19, 2011

Figure 3: FAS Monthly Returns

FAS
25

20

15

10
FAS
5

0
Jan-09

Nov-09

Jan-10

Nov-10

Jan-11
May-09

Sep-09

May-10

Sep-10
Mar-09

Jul-09

Mar-10

Jul-10
 0
2
4
6
8
10
12
Jan-09
Figure 4: TNA Monthly Returns

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10
TNA

May-10

Jul-10

Sep-10

Nov-10

Jan-11
[LEVERAGED ETFS] January 19, 2011

TNA
 [LEVERAGED ETFS] January 19, 2011

Figure 5: BGU Monthly Returns

BGU
10
9
8
7
6
5
4
BGU
3
2
1
0
Jan-09

Nov-09

Jan-10

Nov-10

Jan-11
May-09

Sep-09

May-10

Sep-10
Jul-09

Jul-10
Mar-09

Mar-10
 [LEVERAGED ETFS] January 19, 2011

Figure 6: DRN Monthly Returns

DRN
10
9
8
7
6
5
4
DRN
3
2
1
0
 0
2
4
6
8
10
12
Jan-09
Figure 7: TYH Monthly Returns

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10
TYH

May-10

Jul-10

Sep-10

Nov-10

Jan-11
[LEVERAGED ETFS] January 19, 2011

TYH
 [LEVERAGED ETFS] January 19, 2011

Table 10: Monthly Comparisons

MONTHLY RETURNS
Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09
EDC 15.02 6.07 5.07 10.47 4.73 13.44 4.39 11.26 3.11 3.17 2.81 8.08
ERX 14.75 0.53 9.39 6.04 9.03 10.25 0.45 7.79 7.54 3.67 0.8 3.89
FAS 1.66 16.83 2.96 8.01 22.07 4.59 5.03 7.91 0.53 1.58 1.87 0.76
TNA 5.34 2.84 3.37 5.82 1.38 11.57 5.03 5.56 2.18 1.66 3.93 4.58
BGU 9.78 2.94 3.11 5.99 1.99 7.62 1.15 4.96 1.62 0.08 2.07 3.57
DRN 4.84 1.55 3.82 0.57 4.3
TYH 11.88 3.26 3.05 7.73 1.87 10.22 1.47 3.88 0.49 0.41 1.17 4.34

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11
EDC 8.84 1.66 2.21 2.16 1.95 4.33 1.57 7.77 10.02 4.36 3.16 8.14 2.71
ERX 8.86 9.39 2.68 4.94 2.98 2.17 1.31 10.37 10.8 3.72 1.1 8.37 2.36
FAS 5.12 4.38 1.12 2.43 4.84 1.16 7.81 6.68 10.95 2.25 0.09 5.7 5.75
TNA 7.97 3.71 6.93 2.51 6.68 2.25 0.19 4.76 11.05 1.68 4.2 6.47 5.22
BGU 5.12 4.76 3.2 2.17 3.77 1.69 8.46 6.38 8.36 1.14 2.37 6.34 2.84
DRN 1.32 5.43 2.11 1.03 9.74 0.78 3.23 9.74 9.7 1.35 2.74 2.16 5.4
TYH 4.76 4.39 3.97 3.46 4.12 3.03 0.64 6.45 7.81 2.7 1.04 6.53 2.75
 [LEVERAGED ETFS] January 19, 2011

Disclaimer
The information in this report is not a recommendation or advice to participate in any particular
trading strategy. All information contained in the report is accurate to the best of the author’s
knowledge. Anyone implementing a trading strategy as outlined in this report or similar does so at
his or her own risk. The author of this report is not liable for any trading losses based on the
information contained within.