Leveraged ETF's are a questionable deal for everyone except for the issuers, unless you're one of the "lucky few" who happens to time it just right (as well as get out before the inevitable slippage-related decline and reverse split). If you're "feeling lucky", why not go to the leveraged futures markets (or options-on-futures) markets instead? Futures have more transparency and far less slippage, IMO.
Could UGAZ go to zero?
- Thread starter Morning Attack
- Start date
how these bone headed contracts traded on equity exchanges are legal just baffles my mind. they are junk, crap, piss, looking for suckers. if you want the horses mouth, don't kiss a pig and close your eyes pretending its a horse. It just ate some shit and now its in your mouth. Trade the futures. GLD may be a rare exception (although i love them for perpetuating the excesses and all the sheeple piling in and running for the exits predictably). Nat gas has one real play. And futures have a built in tax benefit to boot. If you don't want a lot of exposure, just trade small.
Also if you are playing commodity EtF's don't forget to watch the COT reports on the futures exchanges, they are still the dog wagging your tail. Don't dumb it down and think its safe - i've traded nearly every market and every product sans swaps and i would never trade UGAZ. What a pile of shit.
Also if you are playing commodity EtF's don't forget to watch the COT reports on the futures exchanges, they are still the dog wagging your tail. Don't dumb it down and think its safe - i've traded nearly every market and every product sans swaps and i would never trade UGAZ. What a pile of shit.
You can short the leveraged ETFs too. Someone who shorted UGAZ four or so months ago would be up 85% right now (minus some fees): from $10 to $1.50. So it does not have to be a losing game.
You can always short the leveraged ETF pairs too. IB offers them as shorts all the time. A few brave souls short both opposites in the same account, such as UGAZ and DGAZ and make about 15-20%/year. I have read that if they don't have enough cash buffer in their accounts, a volatility spike may make their brokerage liquidate them, maybe at a loss. I do not know how it really works but their are threads about shorting the leveraged ETF pairs on ET.
Levered ETF's/ETN's can be very difficult and/or stratospherically expensive to borrow. And if you're forced to cover due to shares being recalled, it will more than likely be at a very bad time. "Everyone knows" these things are going asymptotically towards 0, but that in itself makes shorting them dangerous.
The shorting system for equities is antiquated and seems to be a cash cow for a small number of big brokers -- I've never heard of a broker passing these fees to the clients who actually own the shares (long); if anyone knows otherwise then please correct me as such a broker might be worth using for that reason alone.
I believe IB does. They use to advertise it a lot. You get a very small piece of it, but they do share the borrowing fees. They are the only firm I know that does it.
How does shorting something that is going towards 0 make it dangerous? Please explain your logic.
Also, I totally agree leveraged ETFs can be dangerous; I think borrowing them costs about 5% annually from IB. They can move 5% in a couple of hours!
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I will definitely not invest in one of these leveraged products. I played poker for a living and I only played when I had an advantage. Why would I accept here having the odds stacked against me, right? When the time comes, I will probably buy shares of a natural gas producer, like Devon Energy.
Thank you. I started reading "Trade Stocks and Commodities with the Insiders: Secrets of the COT Report".
Thank you. I started reading "Trade Stocks and Commodities with the Insiders: Secrets of the COT Report".
I trade the leveraged ETFs all the time. You have to know what you are doing, and you must not hold these positions for very long due to deterioration. They are great for day trades and okay for a few days. I wish I had made this trade, but if someone had bought the first 15-minute candle on DUST this a.m., he/she could have risked about $100 on 200 shares (SL below the candle) and made about $400 at the close. That's 4:1. The first 15-minute candle of the day will often just run on DUST and NUGT.
But buying UGAZ for a long term hold would be murder due to the deterioration. These things are meant to be day traded. But shorting DGAZ long term would capture the deterioration in the trader's favor, and a 5% annual borrowing cost (I think that it IB's fee) is actually tiny compared to possible reward. So if nat gas did start an uptrend, shorting DGAZ for the long term would actually be smart and buying UGAZ for the long term would be dumb.
But that isn't even true! Just look at buying DGAZ 3 months ago. We would be up over 300% today. Shorting UGAZ could never get above 100%! So I stand corrected! Shorting UGAZ 3 months ago would pay about 70%. Which would you rather have, 70% or 300%?
Also, just look at the red shooting star on DGAZ today. It MIGHT be topping right now. No volume spike doesn't help, but the candle looks very toppy.
All the naysayers saying don't buy UGAZ, but it is essentially the same as DGAZ which has paid 300% in 3 months. I do NOT think buying UGAZ is a bad idea, as long as there is evidence a bottom is in place.
I might be buying some UGAZ soon. Want to see more weakness on the chart. Maybe start scaling in bit by bit.
But buying UGAZ for a long term hold would be murder due to the deterioration. These things are meant to be day traded. But shorting DGAZ long term would capture the deterioration in the trader's favor, and a 5% annual borrowing cost (I think that it IB's fee) is actually tiny compared to possible reward. So if nat gas did start an uptrend, shorting DGAZ for the long term would actually be smart and buying UGAZ for the long term would be dumb.
But that isn't even true! Just look at buying DGAZ 3 months ago. We would be up over 300% today. Shorting UGAZ could never get above 100%! So I stand corrected! Shorting UGAZ 3 months ago would pay about 70%. Which would you rather have, 70% or 300%?
Also, just look at the red shooting star on DGAZ today. It MIGHT be topping right now. No volume spike doesn't help, but the candle looks very toppy.
All the naysayers saying don't buy UGAZ, but it is essentially the same as DGAZ which has paid 300% in 3 months. I do NOT think buying UGAZ is a bad idea, as long as there is evidence a bottom is in place.
I might be buying some UGAZ soon. Want to see more weakness on the chart. Maybe start scaling in bit by bit.
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