Leveraged ETF Share Creation/Redemption Signals

Can investors profitably trade the effects of leveraged and inverse exchange-traded funds (LETF) share creation and redemption on prices? In his July 2025 paper entitled “Am I the Patsy? LETF Issuance is Signal, Not Noise: How Trading LETFs a Day Late can make you a Dollar Richer”, Rob Bezdjian introduces the “Day Late-Dollar Richer” (DLDR) strategy, which exploits LETF share creation and redemption behaviors. Issuers of LETFs must, in aggregate, overprice created shares and underprice redeemed shares to remain solvent. DLDR therefore uses LETF share data (typically released by 8:00PM ET) to trade opposite issuers at the next close, as follows:

• If the number of shares increases, sell or short at the next close.
• If the number of shares decreases, buy or close short at the next close.
• If the number of shares is unchanged, do not trade.

Testing assumes trades occur at net asset values (NAV) with opening trade sizes equal to changes in number of shares. Applying DLDR as modeled to four volatility and eight commodities ProShares LETFs during January 2015 (or inception) through mid-July 2025, he finds that:

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