How much value can a leveraged ETF lose to volatility decay in a choppy, sideways market?

Enter the fund's leverage multiplier, the underlying index's typical daily volatility, a number of trading days, and your position value. The tool applies the standard leveraged-fund decay approximation to estimate how much value compounds away purely from daily rebalancing, assuming the index ends the period at the same price it started.

Why would a fund lose value if the index didn't move?

Daily-reset leveraged and inverse funds rebalance every day to maintain their target multiple. In a choppy, sideways market, that daily rebalancing compounds against the fund even when the index is flat over the full period, a well-documented effect often called volatility decay or beta slippage.

Leveraged ETF Volatility Decay Calculator

Enter the Fund's Numbers

Your Result

Enter the fund's leverage, the index's daily volatility, and a holding period to estimate decay cost.

How this is calculated

This estimates volatility decay only: the value a leveraged or inverse fund loses purely from daily rebalancing and compounding, assuming the underlying index round-trips back to its exact starting price over the period. Any actual directional gain or loss from the index moving up or down is separate from this number.
The estimate uses the standard approximation for daily-reset leveraged fund decay: decay rate per day ≈ 0.5 × leverage × (leverage − 1) × daily variance, compounded across the number of days entered.
This is why leveraged and inverse ETFs are built and marketed as short-term trading tools, not buy-and-hold positions. The higher the leverage and the choppier the underlying index, the faster this decay compounds, even when the index itself goes nowhere.
A 1x (unleveraged) fund has no volatility decay under this formula, since leverage minus 1 equals zero.
This is a simplified educational estimate based on the inputs you provide, not the actual historical or projected performance of any specific fund. Real funds also carry expense ratios, tracking error, and financing costs that aren't included here.

Risk & liability disclaimer: This calculator produces a simplified mathematical estimate of volatility decay based on the inputs you enter. It does not represent the actual performance of any specific leveraged or inverse ETF, does not include expense ratios, financing costs, or tracking error, and assumes a constant daily volatility that real markets do not maintain. It is not financial advice and is not a recommendation to buy, sell, or hold any leveraged or inverse product. Trading Habits is not a broker-dealer, registered investment adviser, or affiliated with any fund provider. Leveraged and inverse ETFs carry substantial risk and are not suitable for all investors. Consult a licensed professional and the fund's own prospectus before trading these products.

How much value can a leveraged ETF lose to volatility decay in a choppy, sideways market?

Enter the Fund's Numbers

Your Result

How this is calculated

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