u/yozuo2

Some thoughts after playing it. I haven’t tried it in ranked yet (I’m a d4 Nid top main). I actually think you could climb decently high with this pick. Mandate seriously makes it viable. I think grasp is the best keystone or at least you could go it every game and be fine. It has the best minor runes. Revitalize is bait, unflinching is better unless the matchup has no cc. For secondaries, I actually do not like transcendence. It has no value in lane. I like manaflow and scorch. I also think sudden impact with relentless/ultimate hunter could also be quite good. I go double adaptive, scaling health. Max Q over W for better waveclear. I think W max is pure bait. It makes you have to build bamis which sucks. I think mandate rush feels really good. Mandate, Fimble, and Unending despair feel really good as a 3 core. I think any more ap items after mandate is bait. Full tank with haste feels a lot better and you are more useful.

Has anyone else had success with this pick?

TLDR AT BOTTOM

The biggest misunderstanding about leveraged ETFs is the idea that “daily resetting causes automatic decay.” That is not completely accurate. A leveraged ETF does not promise to give 2x or 3x the long-term return of an index. It promises to target 2x or 3x the daily return of the index. Because each day’s return compounds into the next day, the final long-term result depends heavily on the path the market takes. This is why LETFs can do better than the simple long-term multiple in smooth trending markets, but worse in choppy markets.

The first key point is that volatility decay is not unique to LETFs. Volatility decay exists in every risky asset because returns compound geometrically. If an asset goes up 10% and then down 10%, it does not return to even. It goes from 100 to 110, then from 110 to 99, leaving a 1% loss. That happens in normal stocks, bonds, commodities, portfolios, and leveraged products. It is not caused by the ETF wrapper. It is just the math of compounding.

The basic geometric return formula is:

g ≈ μ − 0.5σ²

In this formula, g means geometric return, μ means average return, and σ means volatility. The formula shows that higher volatility reduces compounded return. Two assets can have the same average return, but the more volatile one will usually compound worse over time. This is why diversification matters. Diversification can reduce volatility without necessarily reducing expected return by the same amount, which can improve long-term compounded growth.

When leverage is added, the same idea still applies. The leveraged version of the formula is:

g_L ≈ Lμ − 0.5L²σ²

This formula is not specific to LETFs. It applies to leveraged exposure in general, whether the leverage comes from margin, futures, swaps, options, or leveraged ETFs. The expected return part, Lμ, rises linearly with leverage. If leverage doubles, expected return roughly doubles. If leverage triples, expected return roughly triples. But the volatility drag part, 0.5L²σ², rises with leverage squared. That means 2x leverage creates about 4 times the variance drag, and 3x leverage creates about 9 times the variance drag.

This is the central mathematical issue. Leverage increases expected return, but it increases volatility drag even faster. So leverage can improve compound growth up to a point, but too much leverage eventually destroys compound growth because the volatility penalty becomes too large. This is why it is wrong to say, “LETFs are bad because they have volatility decay.” All risky assets have volatility decay, and all forms of leverage magnify volatility decay. What is specific to LETFs is not volatility decay itself. What is specific to LETFs is the daily rebalancing mechanism used to maintain constant daily leverage.

Daily resetting is the mechanism that keeps the LETF at its target leverage each day. If the underlying index rises, the fund increases exposure so it can remain 2x or 3x levered on the new, larger asset base. If the underlying index falls, the fund reduces exposure so it can remain 2x or 3x levered on the new, smaller asset base. This daily reset creates path dependence. In a trending market, that can help. In a choppy, mean-reverting market, that can hurt.

For example, if an index goes up 10% and then up 10%, it moves from 100 to 121, a 21% gain. A 2x daily-reset LETF goes up 20% and then up 20%, moving from 100 to 144, a 44% gain. Two times the index’s total return would only be 42%, so the daily-reset LETF actually does better than 2x the index’s full-period return. This happens because after the first winning day, the LETF rebalances upward and has more dollar exposure going into the second winning day.

Daily resetting can also help in a steady downtrend compared with fixed-dollar margin leverage. If an index goes down 10% and then down 10%, the index falls from 100 to 81, a 19% loss. A 2x daily-reset LETF falls from 100 to 80, then from 80 to 64, a 36% loss. Two times the index’s total loss would be 38%, so the daily-reset LETF actually loses slightly less. This happens because the fund cuts exposure after the first loss. In that sense, daily resetting is not purely a flaw; it is also a risk-control mechanism that prevents leverage from rising uncontrollably after losses.

The environment where daily resetting hurts most is a choppy, mean-reverting market. If the index goes up 10% and then down 10%, the index ends down only 1%, moving from 100 to 99. But a 2x LETF goes up 20% and then down 20%, moving from 100 to 120 to 96, a 4% loss. With 3x leverage, up 30% and down 30% turns 100 into 91, a 9% loss. This is the classic “volatility decay” example, but again, the decay comes from leveraged compounding. The LETF-specific part is that the fund resets exposure every day, which makes it buy after gains and sell after losses.

The daily reset issue is really about the interaction between leverage, volatility, and serial correlation. Serial correlation means whether today’s return tells us anything about tomorrow’s return. If returns have positive serial correlation, up days tend to follow up days and down days tend to follow down days. That is a trending market, and daily rebalancing tends to help. If returns have negative serial correlation, up days tend to be followed by down days and down days tend to be followed by up days. That is a choppy market, and daily rebalancing tends to hurt.

A useful formula for comparing buy-and-hold leverage to rebalanced leverage over two periods is:

E[BH₂ᴸ − RB₂ᴸ] = (β − β²)(μ₁μ₂ + σ₁σ₂ρ₁₂)

Here, BH means buy-and-hold leverage, RB means rebalanced leverage, β means the leverage ratio, μ₁ and μ₂ are the expected returns in the two periods, σ₁ and σ₂ are the volatilities in the two periods, and ρ₁₂ is the serial correlation between the two periods. This formula is useful because it shows that daily resetting is not automatically good or bad. It depends on the relationship between leverage, volatility, and serial correlation.

For normal long LETFs, β > 1. That means:

β − β² < 0

For example:

If β = 2, then β − β² = 2 − 4 = −2.

If β = 3, then β − β² = 3 − 9 = −6.

Because β − β² is negative, whether daily rebalancing helps or hurts depends heavily on this part:

μ₁μ₂ + σ₁σ₂ρ₁₂

The most important term is usually ρ₁₂. If ρ₁₂ is positive, returns are more trend-like, and daily rebalancing tends to help. If ρ₁₂ is negative, returns are more mean-reverting, and daily rebalancing tends to hurt.

On a daily basis, volatility matters much more than expected return. A stock market might have an expected annual return around 8%, which is only about 0.03% per trading day. But daily volatility might be around 1%. So the expected return term, μ₁μ₂, is usually tiny, while the volatility and correlation term, σ₁σ₂ρ₁₂, can dominate. This is why high volatility combined with negative serial correlation is the worst environment for daily-reset LETFs.

This also explains why single-stock LETFs are much more dangerous than broad index LETFs. The issue is not simply that they reset daily. The issue is that single stocks are much more volatile than diversified indexes. Since volatility drag scales with leverage squared, applying 2x or 3x leverage to a very volatile single stock can create enormous variance drag. A broad index can still suffer from daily reset effects, but because it is diversified and usually less volatile, the drag is generally less severe than it would be for a single stock (in fact it is more likely that there is no significant drag for a broad index).

The next important point is that the leverage of one instrument is not necessarily the leverage of the whole portfolio. If someone puts 100% of their money into a 3x LETF, then yes, the whole portfolio is roughly 3x exposed to that asset. But if someone puts 20% of their portfolio into a 3x LETF, the portfolio only gets 60% exposure from that position:

Portfolio exposure = wL

So in this case:

Portfolio exposure = 20% × 3 = 60%

The fund itself is 3x, but the whole portfolio is not 3x. This distinction matters a lot. A 3x LETF can be extremely risky as the entire portfolio, but it can be reasonable as a small component used to create a specific amount of exposure.

For a full portfolio with multiple positions, the total exposure is:

Total exposure = Σ(wᵢLᵢ)

This means the total portfolio exposure depends on each position’s portfolio weight, wᵢ, multiplied by that position’s leverage, Lᵢ. The leverage number printed on one fund does not automatically tell you the leverage of the whole portfolio.

For example, suppose you want 90% exposure to Asset A and 60% exposure to Asset B. Your total exposure is 150%, so the whole portfolio is 1.5x levered. You could create that exposure by borrowing 50% in cash and buying both assets directly. Or you could use a small allocation to a highly leveraged version of one asset. In the ideal case, ignoring fees, slippage, tracking error, and financing differences, what matters is the final portfolio exposure:

Asset A: 90%

Asset B: 60%

Cash: −50%

Total exposure: 150%

Overall portfolio leverage: 1.5x

The portfolio does not care whether that exposure came from margin, futures, swaps, or LETFs. The total leverage of the whole portfolio is what matters. This is why high-leverage instruments are not automatically bad. A 6x product would be reckless if it made up the entire portfolio, because the whole portfolio would have 600% exposure. But if 10% of the portfolio is placed in a 6x product, then that piece contributes only 60% exposure:

Portfolio exposure = 10% × 6 = 60%

The instrument is highly levered, but the portfolio exposure can still be moderate. This is one of the best uses of LETFs: they can act as compact exposure tools that free up capital for other assets. Instead of putting 60% of a portfolio into a normal 1x stock ETF, an investor could put 20% into a 3x stock ETF and get roughly the same 60% stock exposure. The remaining 80% of the portfolio can then be used for bonds, cash, managed futures, gold, international stocks, or other diversifiers.

However, this only works if the investor rebalances. If the LETF rises sharply, it can become too large a portion of the portfolio and increase total risk. If it falls sharply, the portfolio may become underexposed. Rebalancing brings the portfolio back to the intended exposures. This is what makes the portfolio-level view valid. The LETF itself may be highly levered, but the total portfolio can remain controlled if the investor manages the total exposures.

TLDR: volatility decay exists in all risky assets, and leverage magnifies it regardless of the leverage tool used. Margin, futures, swaps, options, and LETFs all face the same basic compounding math. The part that is specific to LETFs is the daily reset, which keeps leverage constant each day. That daily reset helps in trending markets, hurts in choppy mean-reverting markets, and prevents leverage from drifting upward after losses the way traditional margin can.

The main point of this explanation is not to say that everyone should use LETFs. I am simply trying to dispel the large amount of misunderstanding around volatility decay, daily resetting, and leverage in the portfolio context. Whether someone should actually use LETFs is a different question.

In practice, LETFs can have disadvantages that make them less attractive than other forms of leverage. Daily-reset LETFs often have higher borrowing costs, partly because many of them have high expense ratios and embedded financing costs. Other forms of leverage, such as futures, margin, or certain fund structures, may sometimes provide cheaper leverage. For example, funds like RSSB and NTSX are generally lower-cost examples because they have relatively low expense ratios and mainly use Treasury futures for leverage, which have historically had lower implied borrowing costs. So the argument is not that LETFs are always the best leverage tool and everyone should use them. The argument is that many criticisms of LETFs are aimed at the wrong thing. The criticism "3x LETFs decay too much" does not make sense. Rather, the criticism of "this LETF costs too much, you can get the same exposure for cheaper costs using ___" makes way more sense. Or simply "You are not an individual that should use leverage" makes more sense.