Two forces work together. The roll: each day the product sells a cheaper near contract and buys a dearer far one, losing the difference when the curve is in contango. And compounding: leveraged and inverse products reset daily, so a choppy path costs money even when the start and end points are identical.
The practical rule is that these instruments are rentals, not holdings. Their behaviour over a day matches the label; their behaviour over a year rarely resembles anything an investor intended.
Example: a 2x long volatility product sees the index go 20, 26, 20, 26, 20 over four days. The index is unchanged. The product, rebalancing to 2x daily on a curve in contango, finishes meaningfully lower — the arithmetic of daily resets plus roll cost, with no view expressed at all.
Related: volatility-etp, vix-roll-yield, contango, volmageddon