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$268.26

ProShares UGL/GLL
Symbol: ^UGLYF

Fund manager:  Pal Anand
Has earned $6014.04 managing YoutualFunds
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Description: Although the Kelly Criterion provides an upper bound on the amount that should be risked (100% if Probability of Winning is 100% with favorable odds), there are sound arguments for risking less. In particular, the Kelly fraction assumes an infinitely long sequence of wagers, but in the long run we are all dead. It can be shown that a Kelly bettor has a 1/3 chance of halving a bankroll before doubling it, and that you have a 1/n chance of reducing your bankroll to 1/n at some point in the future. For comparison, a half kelly bettor only has a 1/9 chance of halving their bankroll before doubling it. No penny/pink stocks. Stop-loss and profit targets are of course entered at the market. The Formula for the ETF Long Term Return The formula for the long term compound annual growth rate of a leveraged ETF cannot be written in terms of just the benchmark return and volatility. It also involves terms containing the skewness and kurtosis of the benchmark. It is derived using a Taylor series expansion. It does not assume that benchmark returns are Gaussian or that returns are continuous as do formulae derived using Itos lemma. But it turns out that for the worlds stock markets and for low levels of leverage (up to about 3) the formula can be approximated by this formula: R = km - 0.5k^2s^2/(1 + km) where R is the compound daily growth rate of the ETF, k is the ETF leverage (not necessarily an integer or positive), m is the mean daily return of the benchmark, and s is the daily volatility (i.e. standard deviation) of the daily return of the benchmark. R is the quantity you use to calculate the long term buy-and-hold return of the ETF. You can see from the formula that if the volatility is zero then R = km so that the return of the ETF is k times the return of the benchmark. The 0.5k^2s^2=(1 + km) term is the volatility drag. Since k^2s^2 is always positive and (1+km) is always close to 1 then the volatility drag is always positive. R is a quadratic function of k with a negative coefficient for the square term. That means we will always get the parabola shape and we will always have a maximum for some value of k. Some algebra shows that the maximum is approximately (for small km) at k = m/s^2 This clearly shows the return/volatility trade-off that determines the optimal leverage. This formula occurs in an appropriate form in the Kelly Criterion (Thorp 2006) and Mertons Portfolio Problem (Merton 1969). Trading R&D is extremely labour intensive, tedious and time consuming involving elements of the traditional strategy development process; namely, coming up with a new trading idea, programming it, verifying the code, back-testing the strategy, modifying the code, and repeating over a period of many weeks, months or years, the real-time walk-forward testing (which validates the back-test), to find viable trading strategies that are not only unique but non-obvious and then wait for down-stream effects to show up, sometimes decades later. In many cases, these hidden gems would be nearly impossible to find any other way and the best of these gems is what I call my "Ultimate Trading Machine" (which is the result of several decades of R&D.) I recently modified (generalized) the system code to take into account all types of market conditions (both trending and choppy) and so it should work well in both types of market conditions.
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^UGLYF Performance (Hypothetical Results)
 
 
Holdings as of 3/20/2012
Holdings delayed for non-members

 JanFebMarAprMayJunJulAugSepOctNovDec
2011               0.43% 53.98% 125.49% 9.99% -21.75%
2012 15.39% 24.07% -24.48% -16.60% -0.87%              
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^UGLYF Timeline as of 3/20/2012
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^UGLYF price:
$368.58
3/20/12 (7:09) ET
^UGLYF price:
$368.58
3/19/12 (15:40) ET
^UGLYF price:
$367.26
3/19/12 (12:18) ET
^UGLYF price:
$367.72
3/19/12 (9:22) ET
^UGLYF price:
$368.64
3/16/12 (15:53) ET
^UGLYF price:
$370.11
3/16/12 (14:09) ET
^UGLYF price:
$370.22
3/16/12 (12:31) ET
^UGLYF price:
$370.94
3/16/12 (12:15) ET
^UGLYF price:
$371.38
3/16/12 (11:51) ET
^UGLYF price:
$370.40
3/16/12 (10:34) ET
^UGLYF price:
$370.80
3/16/12 (10:09) ET
^UGLYF price:
$372.38
3/16/12 (8:45) ET
^UGLYF price:
$372.56
3/15/12 (15:37) ET
^UGLYF price:
$368.03
3/15/12 (10:38) ET
^UGLYF price:
$368.15
3/15/12 (10:20) ET
^UGLYF price:
$372.64
3/15/12 (9:10) ET
^UGLYF price:
$372.64
3/15/12 (5:47) ET
^UGLYF price:
$373.64
3/14/12 (15:42) ET
^UGLYF price:
$369.61
3/14/12 (11:11) ET
^UGLYF price:
$372.44
3/14/12 (11:03) ET