In a rising market with TQQQ having a volatility of 4, Stars has a volatility of 2.2 ((.6)(1)+(.4)(4)=2.2). “Earn Twice the S&P” is the name of the book. So the leverage of Stars is 2.2. This year the leverage is 1.7.

In a down market where TQQQ has fallen 40% from the previous year close you have to include the two years after the low and calculate the average return for the 3 years. Let’s look at a 20% correction in the S&P.

In the down year TQQQ falls 80% and SPY falls 20%. At the year end low the percent TQQQ is raised to 60% for rebalancing TQQQ. TQQQ is purchased at 20 cents on the dollar as compared to the prices at the market highs. The volatility coming off the low rises to as high as 8 over the next two years. The number of TQQQ shares are 6 times those at the previous market highs. The average return over the three years is 26%.

The return in both rising and correcting years (average of down year plus two following years) is about the same. The average return is usually two times the S&P or greater.