Guess theres alot of things I don't get. From 666's link I see you've all been on this trail for awhile. The benchmark index components and SRS do auction in different pits right, so they'll only be correlated and not lock step inverses of each other. That previous similar market lows had SRS at different levels than the recent market lows has it at may be attributable to shorts at the time looking for alternatives to some rules changes going on around then. I realize I'm probably behind the curve on this.
Can SRS reach 300 again? Analyze
- Thread starter omegapoint
- Start date
Actually it's due to the reason I posted here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=2275410&#post2275410
Step by step for anyone interested:
column 1: dates from earlier to later
column 2: closing prices of ^DJUSRE
column 3: daily % change of column 2
column 4: these are the "theoretical" SRS prices. first entry is actual closing price of SRS on the 1st date in column 1. after that, change the price each day by twice the negative % of column 3.
column 5: actual SRS prices
If anyone doesn't get the same result as in the link I'll be happy to help.
http://www.elitetrader.com/vb/showthread.php?s=&postid=2275410&#post2275410
Step by step for anyone interested:
column 1: dates from earlier to later
column 2: closing prices of ^DJUSRE
column 3: daily % change of column 2
column 4: these are the "theoretical" SRS prices. first entry is actual closing price of SRS on the 1st date in column 1. after that, change the price each day by twice the negative % of column 3.
column 5: actual SRS prices
If anyone doesn't get the same result as in the link I'll be happy to help.
I can only ask for your patience while I try to keep up ... here's some of the things I don't get.
*I don't know what you mean by columns. From the link its a line graph. Sure its the right link?
*Not trying to be contentious but, would this be an illustration of the difference and not the underlying "reason" for it?
* The point I made about their trading in different auctions so of course they're not mirror images, does that make any sense or am I just not on the same page?
Ducking for cover after I submit this.
By columns I meant columns in a spreadsheet. My graph at the link is columns 4 & 5 plotted as lines.
I suggested doing the spreadsheet because it shows how leveraged ETFs move over time compared to the indexes they track. It "seems" that SRS should be higher but in fact it's where it should be. Leveraged ETF price action by design matches (with leverage) the movement of the index it tracks but on a daily basis. And over time the compounding effect makes leveraged ETF prices counterintuitive.
We're on different pages because the compounding of daily results explains SRS' price action. I'm not talking about fleeting arbitrage opportunities, I'm talking about the gross movement. Trust me, do the spreadsheet and I'm pretty sure the lightbulb will come on. Even if you've read my explanation and understand the words, the concept is best understood by doing an example.
Once you do this practical exercise you'll see things like the price of a leveraged ETF over time depends not only on the price of the index it tracks, but the path the index takes to get there. For example, let's say SP500 is 950 30 days from now. The price of SDS (-2X) at that point depends on the path the SP500 took to get there and would be different for different paths, even if the SP500 ending price in 30 days is always 950.
I suggested doing the spreadsheet because it shows how leveraged ETFs move over time compared to the indexes they track. It "seems" that SRS should be higher but in fact it's where it should be. Leveraged ETF price action by design matches (with leverage) the movement of the index it tracks but on a daily basis. And over time the compounding effect makes leveraged ETF prices counterintuitive.
We're on different pages because the compounding of daily results explains SRS' price action. I'm not talking about fleeting arbitrage opportunities, I'm talking about the gross movement. Trust me, do the spreadsheet and I'm pretty sure the lightbulb will come on. Even if you've read my explanation and understand the words, the concept is best understood by doing an example.
Once you do this practical exercise you'll see things like the price of a leveraged ETF over time depends not only on the price of the index it tracks, but the path the index takes to get there. For example, let's say SP500 is 950 30 days from now. The price of SDS (-2X) at that point depends on the path the SP500 took to get there and would be different for different paths, even if the SP500 ending price in 30 days is always 950.
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Well omegaP, note he said long term memory;
none of these have any long term memory, simply because compaed to many stocks or commodities, no long term data.
No one said you could not make money[SRS @300], we re just metioning the probabilities. And with all the probabilities against it,, if it went to $300, that may be unhelpful for you.
Technically ,this ultrashort RE just doesnt uptrend that well;
typical DIA,DOW down day , this SRS should have gone up,
but not suprising, it went down.........................................
No, it went down because the Dow Jones U.S. Real Estate Index went up.
Quote from murray t turtle:
Technically ,this ultrashort RE just doesnt uptrend that well;
typical DIA,DOW down day , this SRS should have gone up,
but not suprising, it went down.........................................
I've made a few thousand from this the last 3 days. From long term charts, you're right, it doesn't trend. You can't call what it did in Oct and Nov trends more like explosions. Would I have loved to be riding that missle, like Slim Pickens in Dr Strangelove, when they happened. Some of those pull backs no mere mortal could have hung in for the top on though. I'm a noob alright, but with a secondary market its all about perceptions. The predominant perception/truth is real estate ain't gettin any better. I know its an oversimplification for you guys but ...what the hey, I'll be carefull. 666, I don't have a spreadsheet program, don't even know how to do one. thanx for the patience.