How is a leveraged return calculated?

Gross Leveraged Return = Asset Return% × Leverage Factor. Net Leveraged Return = Gross Return − Borrowing Cost. For example, a 10% asset return at 3× leverage produces a 30% gross leveraged return. If borrowing costs are 2% (on 2/3 of the position borrowed at 9%/yr for one year), the net leveraged return is approximately 28%. Our Simple Leverage tab calculates this for any combination of return, leverage, borrowing rate and holding period.

What is volatility decay in leveraged ETFs?

Volatility decay (also called beta slippage or compounding decay) is the systematic underperformance of leveraged ETFs relative to their stated multiple over time. Because leveraged ETFs reset their exposure daily, the compounding of daily returns in volatile markets produces a lower long-run return than simply multiplying the underlying index return by the leverage factor. The annual decay is approximately: 0.5 × leverage × (leverage-1) × annual_volatility². Higher volatility = greater decay.

Should I hold a 3x leveraged ETF long-term?

It depends on the underlying return and volatility. In a persistently rising, low-volatility market (like the US equity bull market from 2009–2021), 3x ETFs can dramatically outperform. In volatile sideways markets, volatility decay causes them to significantly underperform even a flat index. Our ETF Decay tab calculates the actual expected return for any assumption of return and volatility, showing exactly when a 3x ETF beats or trails the unlevered index.

What is the Kelly Criterion?

The Kelly Criterion is a mathematical formula that calculates the optimal fraction of capital to risk on each trade to maximise long-term portfolio growth: f* = (p × b − q) / b, where p is win rate, q is loss rate (1-p) and b is the win/loss ratio (average win divided by average loss). The Kelly fraction tells you both how much capital to risk per trade and the implied optimal leverage. In practice, Half Kelly (risking 50% of the full Kelly amount) is widely recommended as it significantly reduces drawdowns with a small reduction in theoretical CAGR.

What is the difference between Simple Leverage and ETF Decay tabs?

The Simple Leverage tab calculates leveraged return for a single holding period — useful for stocks, futures, margin accounts, or any position where you borrow to amplify returns. The ETF Decay tab models leveraged ETFs specifically, which daily-reset their exposure and therefore suffer compounding volatility decay over time. Use Simple Leverage for direct leverage (margin, futures); use ETF Decay for 2x and 3x leveraged ETF products.

Is this leveraged return calculator free?

Yes. The Leveraged Return Calculator Pro on StockToolHub is completely free with no registration or account required.

Leveraged Return Calculator Pro — Amplified Return, ETF Decay & Kelly

Asset & Trade Setup

Underlying Asset Return

Positive = gain, negative = loss

Leverage Multiplier

Initial Capital

Cost of Leverage

Borrowing Rate

%/yr

Holding Period

days

Quick Leverage: 1×

1×5×10×15×20×

Leveraged Return on Capital

—

Enter return % and leverage to calculate

Unlevered Return

—

Gross Levered P&L

—

Borrowing Cost

—

Net Levered P&L

—

Return Amplification

—

Break-Even Return

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Leveraged Return at Different Asset Returns

What each tab calculates

Simple Leverage

Calculate the amplified return at any leverage level, net of borrowing costs. Includes break-even return threshold, return amplification ratio, and a sensitivity chart showing leveraged return across a full range of asset returns.

ETF Decay

Model volatility decay (beta slippage) on 2× and 3× leveraged ETFs. Shows the actual ETF return vs theoretical multiple, daily decay rate, and how much the ETF underperforms over any holding period due to compounding drag.

Levered vs Unlevered

Long-term portfolio comparison — same capital, levered vs unlevered — with optional volatility decay modelling, CAGR for each, total borrowing cost, and dollar advantage of the winning strategy over any time horizon.

Kelly Optimal

Calculate the mathematically optimal leverage or position size using the Kelly Criterion — the formula that maximises long-term portfolio growth rate for any win rate and risk-reward ratio. Supports Full, Half and Quarter Kelly fractions.