# Replaying a volatile year: why the swings decide

> Replay a real year of NVDA and TSLA daily moves through 2x and -2x funds and see why the size of the swings, not the year's move, decides the result.

Data as of Nov 10, 2026. Rebuilt every trading night.

## Replaying a volatile year: why the swings decide

Data as of Nov 10, 2026. Rebuilt every trading night.

Over the year to Nov 10, 2026 , NVDA ended 14.9% lower , yet 2 times its daily moves compounded to a 37.7% loss ; NVDL lost 44.0% .

Risk and Execution · Lesson 1 of 4 1 2 3 4

Slide the amount to see each result in dollars. Amount (hypothetical) $10,000 On $10,000: NVDA −$1,495, 2x each day, compounded −$3,768, NVDL −$4,402. Hypothetical amounts.

### The question

My stock ended the year about flat. Why did the 2x fund on it lose so much?

### The idea

- You met the daily reset in Leveraged and inverse ETFs and the path effect in Leveraged decay in numbers . Over a whole year, what drives the path effect? Here "path" means the set of daily moves the stock made, not the order they came in. The answer: the size of the daily swings , measured as volatility (how widely daily moves spread, stated at a yearly rate). A rough guide for a fund that resets each day:

- Drag ≈ (multiple² − multiple) ÷ 2 × volatility²

- It is a guide, not an exact rule: it is closest when the year's move is small. Two things follow: - Drag grows with the square of the swings: double the volatility, about 4 times the drag.

- Inverse funds pay more. For +2x the factor is (4 − 2) ÷ 2 = 1 . For −2x it is (4 + 2) ÷ 2 = 3 , the same as a +3x fund.

### Worked example

One year, Nov 10, 2025 to Nov 10, 2026 .

Case 1: a flat year with big swings (NVDA).

| | Return |
| --- | --- |
| NVDA | −14.95% |
| 2 × the year | −29.90% |
| 2x each day, compounded | −37.68% |
| NVDL (2x NVDA fund) | −44.02% |

The rough guide: NVDA's volatility was 38.46% a year. 1. Square it: 0.3846 × 0.3846 = 0.148 . 2. Multiply by the factor for 2x, which is 1: 0.148 , about 15 points of drag. 3. The real path effect: −37.68 − ( −29.90 ) = −7.78 points .

Close. The swings, not NVDA's move, drove the compounded loss. NVDL's further −6.3 points is the fund's gap (fees and the cost of the swaps that give its exposure).

Case 2: both sides lost (TSLA). TSLA fell 14.70% with volatility of 45.74% .

| | 2x long (TSLL) | −2x short (TSLQ) |
| --- | --- | --- |
| 2 × the year | −29.40% | +29.40% |
| Daily multiple, compounded | −41.53% | −26.30% |
| Fund | −48.44% | −20.45% |

TSLA fell, and the short fund still lost: its factor of 3 turned a "should-be" +29% into −26.30% before costs.

### The common mistake

"Path dependence means the order of the days matters." For a fund that resets each day, it doesn't. The year's result multiplies each day's (1 + multiple × move), and a product is the same in any order. What matters is how big the daily moves were . "Shuffle the days" shows it.

### Check your understanding

Pick an answer to see why. Two of three right passes the lesson.

1. Two stocks each end a year flat. Stock A had volatility of 20%, stock B 40%. Before costs, how does B's 2x daily fund's drag compare with A's? A About the same B About twice as large C About 4 times as large D Smaller, because B's moves cancel out Answer: C. About 4 times as large. drag grows with volatility squared: 0.4² = 0.16 against 0.2² = 0.04, 4 times. Not B: volatility doubled, but the drag follows its square. 2. An index rose 10% over a choppy year. Which fund is most likely to have lost money before costs? A A −2x daily fund B A +2x daily fund C The index itself D None of them could lose Answer: A. A −2x daily fund. the −2x fund starts 20 points behind and pays a factor of 3 on the swings, against 1 for +2x. Not B: +2x starts about 20 points ahead and has the smaller factor. 3. You replay a 2x fund's year with the days in a different order. What happens to its compounded result before costs? A It changes a lot B It becomes 2 times the index's year C It always improves D It stays the same Answer: D. It stays the same. the result multiplies each day's (1 + 2 × move), and order doesn't change a product. Not A: order matters for stop orders and multi-day stretches, not for a daily-reset fund's year.

### Takeaways

- Check the underlying's volatility before the multiple: drag grows with its square.

- Inverse funds carry more drag: −2x pays about 3 times what +2x pays on the same swings.

- A flat or falling year can cost both the long and the short fund.

### Do it on ETFIQ

Replay your leveraged fund's year Your fund

### Where to next

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Source: ETFIQ, independent ETF data. Recomputed nightly from public filings and prices.
Cite: ETFIQ, Replaying a volatile year: why the swings decide, data as of Nov 10, 2026. https://etfiq.com/academy/risk-and-execution/replaying-a-volatile-year/
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