I have a concern about the ProShares Ultra-short funds; I hope someone here can offer some guidance.

FXI is the iShares FTSE/Xinhua China Index fund; FXP is the double-short tracking the same index. When I looked at the two charts side-by-side, I was alarmed.

FXI bottoms March 20 at 120, peaks May 2 at 165, and has since returned almost to its low point, at 123.50 on July 3, for a net gain of 3%. 

FXP peaks ithe same day at 122, and falls to 59 on May 2;  on July 3 it peaked at 95. That's a net loss, peak to peak, of--22%!  Way more than double the inverse.

 In fact, on July 3 alone, FXI was up only 0.14%, while FXP was down 0.74%. 

Now I understand that some tracking error is inevitable, but when the down side out-leverages  the up side by a factor of 3 or more, that's not my idea of tracking error; that's a serious downside bias. Now I'm afraid that even a small rally in China could wipe me out; and I wonder about all my short funds, too.

 Can someone explain this?

 And just as a small aside:

erryl:

 

Thanks, DI... for bringing up long-short funds ...

I would also like to thank DI, again, for his illuminating comments; but actually "bringing up" the long/short funds seems to have been my own modest contribution : Post #2535319

--Aalan