Holding 3x etf long term

[highrisk]

Thank you all for your replies

Based on posts it looks like - If one can deal with the volatility-caused-decay, and cut out the sharp declines by stop loss, the biggest issue with holding appears to be overnight risk.

Futures dont have this issue (but have other things to deal with like margin calls etc- i have never traded futures but seems like a hassle for non superactive trader)

Not sure how to deal with this overnight risk issue - its a problem across the board except for 24hrs market like futures. And amplified in 3x. Protective put can be stratgey but i checked its too expensive an insurance- 10% for six months. Any other ideas?

And also any ideas on what the stop loss should be for tqqq/spxl? ( i should probably dig through charts, but if someone has already done the analysis it will give me a starting point)

 

[JackRab]

If you want to see if it's possible to profitably hold leveraged ETFs long term, just load up an ETF screener like etfdb.com and see which ETFs currently have the highest 5y returns.

I'm pretty sure the 3x leveraged short ETFs will also be in the top of worst performers... you're just picking a bull market... a bull market x3 obviously outperforms... duh...

 

[JackRab]

Thank you all for your replies

Based on posts it looks like - If one can deal with the volatility-caused-decay, and cut out the sharp declines by stop loss, the biggest issue with holding appears to be overnight risk.

Futures dont have this issue (but have other things to deal with like margin calls etc- i have never traded futures but seems like a hassle for non superactive trader)

Not sure how to deal with this overnight risk issue - its a problem across the board except for 24hrs market like futures. And amplified in 3x. Protective put can be stratgey but i checked its too expensive an insurance- 10% for six months. Any other ideas?

And also any ideas on what the stop loss should be for tqqq/spxl? ( i should probably dig through charts, but if someone has already done the analysis it will give me a starting point)

Overnight risk is overrated... I've seen plenty of times where you would've hit your stoploss in futures during after hours trading, while at open the market is better...

Of course, you have more possibilities of hedging or trading out of positions... but sometimes the overnight trade is shit.

When US elections were on... S&P500 absolutely tanked during the after hours trading together with Asia and the European opening... all recovered before US markets opened....

 

[777]

If you want to see if it's possible to profitably hold leveraged ETFs long term, just load up an ETF screener like etfdb.com and see which ETFs currently have the highest 5y returns.

Spoiler:

Unfortunately 5 year ETF returns have little meaning.

Also, we all know it is "possible" to win at many things for five years without them being wise gambles.

One day way, way, way down the line, if you want to pull up high-leverage ETF winners be sure the list shows all of the ETF's that traded during the period you are looking at.

However, I wish all the best to anyone who invests in an ultra-leveraged ETF and holds it for 30 years. I truly will be happy for you if you do well. Best wishes.

___

If a young person wanted to buy diversified equities and hold for 30 years, I suggest considering Berkshire Hathaway.

Over half of the companies outperform over the market can be attributed to a skillful "leveraging" of their insurance float.

Plus the company is full of sharp and hardworking guys who keep expenses reasonable.

 

[shatteredx]

Not sure how to deal with this overnight risk issue - its a problem across the board except for 24hrs market like futures. And amplified in 3x. Protective put can be stratgey but i checked its too expensive an insurance- 10% for six months. Any other ideas?

Gotta accept risk if you want return.

Maybe diversify across a few sectors?

 

[bln]

Large and wide indexes like S&P 500, Nasdaq 100, etc. seldom gap much at open, maybe in the range pf minus 3-4% as most. So overnight risk is not much of a issue for these. Induvidual shares and sector ETF's is a different story.

I would use long term hold of futures instead of owning a 3xETF. You can archive exactly the same leverage without the deprecation effect and get a better return in the end.

In order to go with high leverage longer term, one need a timing method that allow one to exit, hedge or reduce position then the market enter a larger decline.

 

[GloriaBrown]

Large and wide indexes like S&P 500, Nasdaq 100, etc. seldom gap much at open, maybe in the range pf minus 3-4% as most. So overnight risk is not much of a issue for these. Induvidual shares and sector ETF's is a different story.

I would use long term hold of futures instead of owning a 3xETF. You can archive exactly the same leverage without the deprecation effect and get a better return in the end.

In order to go with high leverage longer term, one need a timing method that allow one to exit, hedge or reduce position then the market enter a larger decline.

Well with future, you take unlimited risk. You can short VIX future then suddenly it goes up from around 10 to 100 then you are done

 

[bln]

Well with future, you take unlimited risk. You can short VIX future then suddenly it goes up from around 10 to 100 then you are done

Well, futures allow you to tailor risk to be what you want it do be. Even less leverage than the 1:1 that index ETF's like SPY and QQQ got. Just because it is futures does not mean one have to use the leverage.

It's relation of the nominal value of the furures contract relative your account size.

 

[GloriaBrown]

Well, futures allow you to tailor risk to be what you want it do be. Even less leverage than the 1:1 that index ETF's like SPY and QQQ got. Just because it is futures does not mean one have to use the leverage.

It's relation of the nominal value of the furures contract relative your account size.

with etf you can put all of your money in it, the worst is getting to lose all. With future, you cannot really control how much risk you can take. A much more serious 9/11 can get vix future gets from 10 to 200 then you can do nothing about it and there is no way you could use historical data to predict this level of risk.

 

[JackRab]

with etf you can put all of your money in it, the worst is getting to lose all. With future, you cannot really control how much risk you can take. A much more serious 9/11 can get vix future gets from 10 to 200 then you can do nothing about it and there is no way you could use historical data to predict this level of risk.

No not true... if you look at underlying value of your futures trade it's the same as buying spot or an etf.

You're looking at a short vix..., vix is more volatile than a normal stock, so that's already increased risk... but any short has unlimited risk. Whether it's a stock, ETF, Future...

Whether you short 125k worth of stocks or you short 1 es future... it's exactly the same.