How do leveraged ETFs (index tracking) set intraday pricing?
Does the price only start the day based on the previous day's rebalancing? No, the tracker will open at the price according to the stock it is tracking.  So for example, if the ETF closed at $10 but the tracked stock continued trading and was priced $15 when the ETF reopened the ETF will open at $15. (Example is for a non-leveraged ETF.)
The ETF supply management policy is arcane.  ETFs are not allowed to directly arbitrage their holdings against the market.  Other firms must handle redemptions & deposits.  This makes ETFs slightly costlier than the assets held. For ETFs with liquid holdings, its price will rarely vary relative to the holdings, slippage of the ETF's holdings management notwithstanding.  This is because the firms responsible for depositing & redeeming will arbitrage their equivalent holdings of the ETF assets' prices with the ETF price. For ETFs with illiquid holdings, such as emerging markets, the ETF can vary between trades of the holdings.  This will present sometimes large variations between the last price of the ETF vs the last prices of its holdings. If an ETF is shunned, its supply of holdings will simply drop and vice versa. "You seem to be assuming that ETFs must all work like the more traditional closed-end funds, where the market price per share tends—based on supply and demand—to significantly deviate from the underlying net asset value per share. The assumption is simplistic. What are traditionally referred to as closed-end funds (CEFs), where unit creation and redemption are very tightly controlled, have been around for a long time, and yes, they do often trade at a premium or discount to NAV because the quantity is inflexible. Yet, what is generally meant when the label ""ETF"" is used (despite CEFs also being both ""exchange-traded"" and ""funds"") are those securities which are not just exchange-traded, and funds, but also typically have two specific characteristics: (a) that they are based on some published index, and (b) that a mechanism exists for shares to be created or redeemed by large market participants. These characteristics facilitate efficient pricing through arbitrage. Essentially, when large market participants notice the price of an ETF diverging from the value of the shares held by the fund, new units of the ETF can get created or redeemed in bulk. The divergence quickly narrows as these participants buy or sell ETF units to capture the difference. So, the persistent premium (sometimes dear) or discount (sometimes deep) one can easily witness in the CEF universe tend not to occur with the typical ETF. Much of the time, prices for ETFs will tend to be very close to their net asset value. However, it isn't always the case, so proceed with some caution anyway. Both CEF and ETF providers generally publish information about their funds online. You will want to find out what is the underlying Net Asset Value (NAV) per share, and then you can determine if the market price trades at a premium or a discount to NAV. Assuming little difference in an ETF's price vs. its NAV, the more interesting question to ask about an ETF then becomes whether the NAV itself is a bargain, or not. That means you'll need to be more concerned with what stocks are in the index the fund tracks, and whether those stocks are a bargain, or not, at their current prices. i.e. The ETF is a basket, so look at each thing in the basket. Of course, most people buy ETFs because they don't want to do this kind of analysis and are happy with market average returns. Even so, sector-based ETFs are often used by traders to buy (or sell) entire sectors that may be undervalued (or overvalued)." This idea does not make sense for most mutual funds. The net asset value, or NAV, is the current market value of a fund's holdings, minus the fund's liabilities, that is usually expressed as a per-share amount. For most funds, the NAV is determined daily, after the close of trading on some specified financial exchange, but some funds update their NAV multiple times during the trading day. http://en.wikipedia.org/wiki/Mutual_fund I am not certain, but I believe that OppenheimerFunds does not report intraday prices.  I would call them up and ask. The portfolio manager at Value Research Online does this very nicely. It tracks the underlying holdings of each fund, yielding correct calculations for funds that invest across the board. Take a look at the screenshot from my account:  If you have direct equity holdings (e.g., not through a mutual fund), that too gets integrated. Per stock details are also visible. But if you add a security to the index you also remove one from the index, thus both a buy and sell. If weights change some go up, some go down thus some need to be purchased and some need to be sold.   So I still don't see how ETFs are net sinks beyond their simple AUM. Not necessarily though, since you can simply adjust the premium. I'm thinking an embedded option is just an option with longer maturity, and the increased price of that adjusted option can be reflected (like any other option) in the strike price or the premium. Am I missing something? "The S&P 500 is an index. This refers to a specific collection of securities which is held in perfect proportion. The dollar value of an index is scaled arbitrarily and is based off of an arbitrary starting price. (Side note: this is why an index never has a ""split""). Lets look at what assumptions are included in the pricing of an index: All securities are held in perfect proportion. This means that if you invest $100 in the index you will receive 0.2746 shares of IBM, 0.000478 shares of General Motors, etc. Also, if a security is added/dropped from the list, you are immediately rebalancing the remaining money. Zero commissions are charged. When the index is calculated, they are using the current price (last trade) of the underlying securities, they are not actually purchasing them. Therefore it assumes that securities may be purchased without commission or other liquidity costs. Also closely related is the following. The current price has full liquidity. If the last quoted price is $20 for a security, the index assumes that you can purchase an arbitrary amount of the security at that price with a counterparty that is willing to trade. Dividends are distributed immediately. If you own 500 equities, and most distributed dividends quarterly, this means you will receive on average 4 dividends per day. Management is free. All equities can be purchased with zero research and administrative costs. There is no gains tax. Trading required by the assumptions above would change your holdings constantly and you are exempt from short-term or long-term capital gains taxes. Each one of these assumptions is, of course, invalid. And the fund which endeavors to track the index must make several decisions in how to closely track the index while avoiding the problems (costs) caused by the assumptions. These are shortcuts or ""approximations"". Each shortcut leads to performance which does not exactly match the index. Management fees. Fees are charged to the investor as load, annual fees and/or redemptions. Securities are purchased at real prices. If Facebook were removed from the S&P 500 overnight tonight, the fund would sell its shares at the price buyers are bidding the next market day at 09:30. This could be significantly different than the price today, which the index records. Securities are purchased in blocks. Rather than buying 0.000478 shares of General Motors each time someone invests a dollar, they wait for a few people and then buy a full share or a round lot. Securities are substituted. With lots of analysis, it may be determined that two stocks move in tandem. The fund may purchase two shares of General Motors rather than one of General Motors and Ford. This halves transaction costs. Debt is used. As part of substitution, equities may be replaced by options. Option pricing shows that ownership of options is equivalent to holding an amount of debt. Other forms of leverage may also be employed to achieve desired market exposure. See also: beta.  Dividends are bundled. VFINX, the largest S&P 500 tracking fund, pays dividends quarterly rather than immediately as earned. The dividend money which is not paid to you is either deployed to buy other securities or put into a sinking fund for payment. There are many reasons why you can't get the actual performance quoted in an index. And for other more exotic indices, like VIX the volatility index, even more so. The best you can do is work with someone that has a good reputation and measure their performance." "ETFs are well suited to day trading, but you should be mindful of the bid-ask spread. See article: Commission-free ETFs are a great way to save money, but watch the bid-ask spread too. Bid-ask spread is largely a function of liquidity, or the volume of   buyers and sellers for an asset during a particular moment in time.   ... It may be more difficult to trade certain assets that are less   liquid, where bid-ask spreads can be higher. Think some penny stocks. If you have the choice, compare the spreads of the ETF and the target stock. Longer-term ""keep & hold"" trading on ETFs tracking futures can be somewhat disadvantageous.  Futures contracts roll-over every month.  Exchange traders have to sell and buy in on the next contract.  ETFs don't reflect the price differential between the futures contract. See here for more detail on that: Positioning For An Oil ETF Rebound? Watch For Contango Contango occurs when the price on a futures contract is higher than   the expected future spot price, which creates the upward sloping curve   on future commodity prices over time. Essentially, the phenomenon   reflects a current spot price that is lower than the futures price.   ... While this phenomena is a normal occurrence in the futures market,   contango can have a negative effect on ETFs." It is a question of how volatile the stock is perceived to be, its beta correlation to the S&P500 or other index. Margin requirements are derived from the Federal Reserve, Self Regulatory Organizations, the exchange itself, the broker you use, and which margining system you are using. So that makes this a loaded question. There are at least three margin systems, before you have your own risk officer in a glass room that doesn't care how leveraged up you get. Brokers primarily don't want to lose money. "The problem with daily-rebalanced ""inverse"" or ""leveraged"" ETFs is that since they rebalance every day, you can lose money even if your guess as to the market's direction is correct. Quoting from FINRA'S guide as to why these are a bad idea: How can this apparent breakdown between longer term index returns and ETF returns happen? Here’s a hypothetical example: let’s say that on Day 1, an index starts with a value of 100 and a leveraged ETF that seeks to double the return of the index starts at $100. If the index drops by 10 points on Day 1, it has a 10 percent loss and a resulting value of 90. Assuming it achieved its stated objective, the leveraged ETF would therefore drop 20 percent on that day and have an ending value of $80. On Day 2, if the index rises 10 percent, the index value increases to 99. For the ETF, its value for Day 2 would rise by 20 percent, which means the ETF would have a value of $96. On both days, the leveraged ETF did exactly what it was supposed to do—it produced daily returns that were two times the daily index returns. But let’s look at the results over the 2 day period: the index lost 1 percent (it fell from 100 to 99) while the 2x leveraged ETF lost 4 percent (it fell from $100 to $96). That means that over the two day period, the ETF's negative returns were 4 times as much as the two-day return of the index instead of 2 times the return. That example is for ""just"" leveraging 2x in the same direction. Inverse funds have the same kind of issue. An example from Bogleheads Wiki page on these kinds of funds says that over 12/31/2007 to 12/31/2010, The funds do exactly what they say on any given day. But any losses get ""locked in"" each day. While normally a 50% loss needs a 100% gain to get back to a starting point, a fund like this needs more than a 100% gain to get back to its starting point. The result of these funds across multiple days doesn't match the index it's matching over those several days, and you won't make money over the long term. Do look at the further examples at the links I've referenced above, or do your own research into the performance of these funds during time periods both when the market is going up and going down. Also refer to these related and/or duplicate questions:" "My original answer contained a fundamental error: it turns out that it is not true that any exchange can create its own product to track any underlying index.  If the underlying index is copyrighted (such as the S&P indices, Russell indices, Dow Jones indices, etc.) then the exchange must enter into a licensing agreement (usually exclusive) with the copyright holder in order to use the index's formula (and name).  Without such a license the exchange would only be able to approximate the underlying index, and I don't think that happens very much (because how would you market such a product?). The CME offers several futures (and other derivatives) whose face value is equivalent to some multiple of the S&P500's value on the date when the product expires.  When such a product is actively traded, it may serve as a reasonable indicator of the ""market""'s expectation of the S&P500's future value. So, you could pay attention to the front month of the CME's S&P 500 Mini future, which trades from 17:00-16:00 Chicago time, Sunday night through Friday afternoon.  But remember that the prices quoted there are As another example, if you care about the Russell 2000 index, until 2017 the ICE Exchange happened to hold the license for its derivatives.  They traded from 20:00-17:30 New York time, Sunday night through Friday afternoon.  But in mid-2017 CME bought that license as well, so now you'll want to track it here. Moral: There's almost always some ""after hours"" product out there tracking whatever index you care about, but you may have to do some digging to find it, and it might not be all that useful for your specific purpose." Mutual funds don't have intraday prices. They have net asset values which are calculated periodically (daily or weekly or any other period depending on the fund). Ok, so disregarding passivity, could you help me through a simplified example?   Say I only had two assets, SPY and TLT, with a respective weight of 35 and 65% and I want want to leverage this to 4x.  Additionally, say daily return covar is:  * B/B .004% * B/S -.004% * S/S .02%   Now, if I read correctly, I should buy ATM calls xxx days in the future.  Which may look like: Ticker, S, K, Option Price, Delta, Lambda  * TLT  $126.04  $126.00  $4.35  0.50  14.5 * SPY  $134.91  $134.00  $6.26  0.55  11.8  ^ This example is pretty close but some assets are far off.   I feel like I'm on the wrong track so I'll stop here.    I just want to lever up my risk-parity. Margin rates are too high and I'm docked by Reg-T. "First it is worth noting the two sided nature of the contracts (long one currency/short a second) make leverage in currencies over a diverse set of clients generally less of a problem.  In equities, since most margin investors are long ""equities"" making it more likely that large margin calls will all be made at the same time. Also, it's worth noting that high-frequency traders often highly levered make up a large portion of all volume in all liquid markets ~70% in equity markets for instance.  Would you call that grossly artificial?  What is that volume number really telling us anyway in that case? The major players holding long-term positions in the FX markets are large banks (non-investment arm), central banks and corporations and unlike equity markets which can nearly slow to a trickle currency markets need to keep trading just for many of those corporations/banks to do business.  This kind of depth allows these brokers to even consider offering 400-to-1 leverage.  I'm not suggesting that it is a good idea for these brokers, but the liquidity in currency markets is much deeper than their costumers." Leverage is when you borrow in order to invest. Mind you, most people aren't going to just give you money to gamble on the stock market completely unsecured; rather, you deposit (say) $10,000 and buy a stock... and then you have $10k in assets which you can borrow against, so you can buy another $10,000 of that stock. Now if the stock goes up you'll make twice the gain (2x leverage). However, if it goes down, you'll lose twice as much as well. If the value of your stock falls, your line of credit will be reduced as well; in this case, since you used all your credit and are now over your limit, your broker will issue a margin call (they will demand a deposit of additional funds, or they will sell some of your stock at their discretion). This protects you from owing more than you invested, but it's still sometimes possible (for instance, if a company spontaneously goes bankrupt and becomes worthless, and your stock becomes worthless). There are also things like leveraged index funds and commodity funds which aim to return some multiple of the market's earnings. These are designed for intraday trading, though, and usually end up underperforming significantly over the long term. [edit] Mose people who accept borrowed funds should generally accept real cash as well. However, if you're trying to short sell, i.e. borrow shares and sell them (in the hopes you can get them back cheaper later after the stock falls) you will need a margin line of credit to do so as well. [edit 2] clarified margin calls