Daily repricing

Daily repricing is a feature of exchange-traded funds (ETF) and can affect your expected performance, especially on inverse products.

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?

Most Popular

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022