What does "twice the inverse of the daily performance" mean for an ETF fund?

Is there ever a bad market for this type of fund? Can your example explain what it means in the context of a market day in the black and the red?

If the index goes up $1, the ETF will go down $2.
If the index goes down $1, the ETF will go up $2.

If you look at historical returns for all of the major indices you will see that this strategy will have bad days more often than not. This is not a buy and hold ETF, but a tactical holding for when you anticipate a market correction.

I put a picture of the two oldest enhanced bull and bear funds out on the web for you at

http://www.fasttrack.net/answers/ryurx.g...

These are S&P 500 index funds from Rydex. The red line is Rydex Nova which is 1.5 times the S&P 500. The green line is Rydex Ursa which is -1.5 times (negative means inverse) the S& P 500.

You will find a listing of all inverse funds at

http://www.fasttrack.net/family.asp?fam=...

In general, such funds are used for hedging purposes. It is VERY difficult to make make using these funds. It is relatively easy to reduce risk and taxes by holding small amounts of an inverse fund instead of selling a long-held position with lots of capital gains.

This article discusses used of bear funds.

http://www.fasttrack.net/direxion.asp

On the same site use the search to find other examples of how to use Mear funds.
http://www.fasttrack.net/direxion.asp