Leveraged ETF Intraday Momentum Strategy¶

This tutorial demonstrates an intraday momentum strategy from Ernie Chan's book Algorithmic Trading. The strategy buys (sells) leveraged ETFs late in the trading session following a significant intraday gain (loss) and holds until the close.

According to Chan, the rationale for this strategy is that, when the leveraged ETF has a sizable intraday gain, the ETF sponsors are forced to buy additional shares of the underlying securities in order to maintain a constant daily leverage as stipulated by the fund prospectus. This buying further drives up the price heading into the close. A similar process occurs following a sizable intraday decline.

Source: Ernie Chan, Algorithmic Trading: Winning Strategies and Their Rationale, Wiley, May 28, 2013, chapter 7.