No it isn't!!! It's very possible for a 3x futures position to go up 10% and a 3x leverage silver ETF to go down 5% in that same period. Or go up 15%. It all depends on the daily path the commodity took to reach that price. Nothing to do with roll or management fees or "decay", it's all path dependent. You quite clearly do not understand how daily rebalancing of leveraged ETFs impacts their returns. At all. So please, lose your own money with your ignorance but don't spread misinformation to those trying to learn. As we've all told you, you're quite simply wrong.
does it EVER make sense to buy and hold a 3X bull ETF ?
- Thread starter trc4949
- Start date
As it would be in 3X leveraged futures when wrong and just holding.
------Guitar drop-----
--BRAAANG---
Try looking at XLE (the 1x etc) vs ERY and ERX, the 3x up and down off the same index for 2011 to 2015.
The index went up 19%, the 3x bull went down 10% and the bear went down 80%. In fact over a long (hold) period it would be very unusual for a leveraged ETF to show the returns equal to holding an equivalent margined futures of the same underlying. Why don't you show us that instead, you who everyone says is wrong but demand proof without even bothering to check if your incorrect assertion is correct!
Here's gold and it's 3x and inverse 3x for the last year
Here's silver and it's 3x and inverse 3x ETFs for the last year
Here's oil and it's 3x and inverse 3x funds YTD (they started trading more recently)
Do I need to go on? Can you present some examples of where the leveraged funds reflect exactly or even within a few percent of what you'd expect given their multiple of the underlying over a "hold" time period? Literally everyone has told you you're wrong, the onus is on you to prove your point my friend which you've gone into contortions to avoid while making a fool of yourself with your "mike drops".
In reality, you don't even need these examples. This is a simple reading comprehension and math problem. First, read a leveraged ETF prospectus. You've done that right, before pontificating on it. What, you've never read through one but you're passing these falsehoods anyway! Unbelievable. OK, well go ahead and read one now. Focus on the way they track daily not total returns. Then build an Excel spreadsheet. Put in a random walk of the underlying in one column, the response of a 2 or 3 times margin futures account in the next, and the response of a 2X or 3X ETN doing daily returns in the next. It will be clear even to someone as obtuse as you (that the correct use of that word, by the way), that they are in no way equivalent. Again, if you can even explain the concept of daily vs total returns to us and provide an example we'd be all ears, but so far you've been unable to do so because you don't actually understand it.
It could be that you're right despite never reading a prospectus or modeling prices or looking at a price chart of a leveraged fund vs its underlying. And all the people who have done all those things who disagree with you are wrong. Possible but highly unlikely. Just a tip for you going forward, when you're in this kind of position, stop, think, consider if all those other people might have a point, spend 5 minutes reading, modeling, and looking at historical price charts......and then respond. It will keep you from looking like such a fool.
And don't forget the first rule of holes. When you find yourself in one, stop digging!
Thank you for making the point for me. There is a strong correlation between the underlying and the 3X derivative. In your examples you make no allowance for the 3X on th underlying. It's all shown at single phasing. The point is, there is no divergence where the Bull fund reacts differently in price direction than the single phase underlying times 3. ---You did not use futures here but instead used the physical spot price as the underlying. Surely, you would understand that whereas GLD is physical bullion, that UGLD is futures contracts with carrying charges etc. ---Still a very strong correlation here and would be even stronger using futures versus futures. --The evidence that you have presented only makes my case stronger.