can you short leveraged ETFs?
- Thread starter econometrics
- Start date
I was thinking in % terms.
But yes that makes sense if ex. FAZ is at 100 and FAS is at 10 and the financials rally it would make sense then. In terms of points.
But yes that makes sense if ex. FAZ is at 100 and FAS is at 10 and the financials rally it would make sense then. In terms of points.
it is a trade of compound.
for daytrading purposes most of the time there's no difference between buying the long etf and shorting the short etf,
when your holding period increases your results will depend not only on the price of the underlying product of your etf, but also on the path that price took to get there,
let me give you an extreme example just to illustrate the point
lets say we have a ultra bear silver fund, it will mover 2x the daily % move in silver, going up when silver goes down, and go down with silver going up, also lets pretend today this fund trades at 40 dol., and silver trades at 40 as well
now if tomorrow silver suddently dropped to 20 dol., it would be 50% move, and the bear fund would be up 100%, so we have silver 20, etf at 80
next day silver gets cut in half again, trading at 10, bear fund doubles again, trading 160
next trading day silver goes up to 12.5, 25% increase will make bear fund go down 50% and it will trade at 80,
next day silver makes another 25% up move, trading around 16 dol, bear fund gets cut in half again, trading at 40,
so we end up silver 16, bear fund 40, silver lost 60%, and unltra bear fund didn't make anything
when you are long these ultra daily etf's for longer timeframes you are basically pyramiding, your exposure gets bigger as price moves in your direction and smaller as it moves against you,
when you are shorting ultra daily etfs and holding them, you are kind of martingaling, where your bet gets bigger as it moves against you and smaller as it goes your way,
if you buy and hold you will lose all your money most of the time and sometimes make extreme gains, if you short and hold you will make money most of the time, but sometimes have huge loses
long ultralong and ultrashort to go long compound.
short ultralong and ultrashort to go long "drag"
short ultralong and ultrashort to go long "drag"
No it's not. They track different. Also re-balance each day.
Accordingly, don't stay at the party too "long"
Oh, one more, people that live glass houses, probably shouldn't throw stones.
When you go long or short a Nx ETF in IB (I believe all the brokers are the same), you will need N times margin to do that trade so instead of buying a 3X $50 ETF which neads 3x (50/4) per share to buy, you can buy 3 shares of 1x $50 ETF. So the answer is that you are cheating yourself and there is no marginal or profit wise benefit in tradinf X times ETFs.
