I have a simple question: How do you get exactly 2:1 leverage in an equity instrument? If you borrow from your broker, you are getting less than 2:1 because of the interest you pay on the borrowed money. If you buy a futures contract, you get less than the 2:1 because you lose the cost of carry (dividends). So how to money managers get exactly 2:1 leverage on an index? In both + return years and - return years? This would be very helpful to know. Granville

Actually, you do. I've been thinking and you could purchase deep in the money calls. The time value is almost nill.. and you get the benefit of the leverage.

I suppose. Its just common that most traders and funds using 2x dont return 2x return. Most return about 50% more, not 100%. Its like I get a portfolio of equities and then I get a bunch more buy or more signals, usually only certain times would my system be fully loaded, while other times their wouldnt be enough signals of say a 52 week breakout or some event to trade on. With no signal, then I wouldnt use the leverage. Its rare for a fund to leverage up all the time, unless its strictly short term stuff like daytrading equities or FX.

I see what you mean. I started thinking about this when I observed that 2:1 funds like UOPIX did not in fact make 2:1 returns as you say. Of course, their time horizon is a single day... I'm looking further out.