how do they eliminate the tracking error in leveraged 2x index future + ETF?

  • Thread starter Thread starter meow
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meow

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I see products by powershare that uses index future to do 2x or 3x leverage, but I don't think it's discussed very much as to how they eliminate the tracking error to the stock index.
If I do the leverage with index future and make up the rest with ETF, I always get tracking errors and even if I multiply it with beta.
 
From an actual disclaimer of a leveraged ETF: "Leveraged ETFs designed to achieve their investment objective on a daily basis are not designed to, and will not necessarily, track the underlying index or benchmarkover a longer period of time." So you dont get the exact 2x,3x leverage if you are tacking overnight positions.
 
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