Advertisement

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%.

Advertisement - Article continues below

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?

Advertisement
Advertisement

Recommended

Economic indicators
Glossary

Economic indicators

An economic indicator is any statistic that allows us to analyse how the economy is performing or is likely to perform in future.
31 Jul 2020
Modern monetary theory (MMT)
Glossary

Modern monetary theory (MMT)

Modern Monetary theory, or MMT, has become popular on the left, both in the UK and abroad. (Wags say that it stands for "magic money tree".) 
14 Jul 2020
Modern monetary theory (MMT)
Glossary

Modern monetary theory (MMT)

Modern monetary theory, or MMT, has become popular on the left, both in the UK and abroad. (Wags say that it stands for "magic money tree".) 
14 Jul 2020
Barbell strategy
Glossary

Barbell strategy

A “barbell… investment strategy means weighting a portfolio towards the two extreme ends of an asset class with nothing in the middle.
8 Jul 2020

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Platinum: the precious metal that looks set to play catch-up with silver and gold
Silver and other precious metals

Platinum: the precious metal that looks set to play catch-up with silver and gold

Gold and silver continue to soar, but there's still time to get in. And there's another precious metal that looks set to go on a bull run too, says Jo…
7 Aug 2020
The MoneyWeek Podcast: how to age well and profit from the “longevity dividend”
Investment strategy

The MoneyWeek Podcast: how to age well and profit from the “longevity dividend”

Merryn talks to economist and author Andrew J Scott and discusses how we can profit from the "longevity dividend" as we live longer; why we need to re…
6 Aug 2020