Shorting Leveraged ETFs: The Role of Borrowing Costs and Rebalancing in Volatility Decay Strategies

Quantpedia's research team examined an approximately market-neutral portfolio consisting of a 50% short position in TQQQ and a 50% short position in SQQQ. Using live market data and securities lending cost data for both securities from July 13, 2015 to August 8, 2026 on QuantConnect, they tested the performance of a volatility decay strategy after incorporating borrowing costs, different rebalancing frequencies, execution timing, and staged rebalancing.