Daily repricing

Daily repricing is a feature of exchange-traded funds (ETF) and can affect your expected performance, especially on inverse products. These offer, say, twice the inverse performance of the underlying asset. In theory this should mean that if the underlying share or index moves down by 1%, the ETF will move up by 2%.

However, in volatile markets the returns can start to drift. For example, let’s say the FTSE 100 moves up by 10%, down by 20% and then up by 10%. It will be flat after three days. However, say your ETF was priced at 100 when you bought. After one day it will be down 20% to 80. A day later it will rise 40% to 112 and on day three it will drop 20% to just under 90 (112 x 0.8 is 89.6).

So the ETF will have dropped around 10%, yet the FTSE has remained flat. The more geared the product, the more pronounced this difference can be.

• See Tim Bennett’s video tutorial: What is an exchange-traded fund?

 

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30 March 1867: Russia sells Alaska to the United States of America

With the American Civil War out of the way, US Secretary of State William Seward agreed on a deal to buy Alaska from Russia, on this day in 1867.