How long can you safely hold 3x leveraged etf?

E

easymon1

In this example a month 6/1 to 7/1 can be possible before leverage-induced decay sets in
but woe is he who holds during a downturn, eg 10/1 to 11/1.

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https://seekingalpha.com/article/4107640-playing-fire-how-long-can-you-safely-hold-3x-leveraged-etf

"Over longer periods, (Longer Than what?) returns can vary significantly from its headline 3x exposure to the S&P 500."

6 business days - These figures are taken from chart prices to simulate holding for 6 business days.

Gain of price compared between SPY and UPRO, a SPY 3X levered etf.
SPY +4.41%, buy date 01/19 13:00, exit date 01/27 EOD
UPRO +13.35%. ditto.

Understood:
UPRO, as a leveraged product, is not a buy-and-hold ETF, it’s a short-term tactical instrument.
Like many leveraged funds, it delivers its 3x exposure only over a one-day holding period.
Over longer periods, returns can vary significantly from its headline 3x exposure to the S&P 500.

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"In conclusion, leveraged ETFs that underperform the most are those
that tend to trade laterally with frequent spikes and pullbacks and those with a consistently large day-to-day volatility.

There is a linear relationship between a leveraged ETF's day-to-day volatility and its
underperformance versus that predicted by its 1x counterpart. Using 5 3x ETFs that include both
low-volatility and high-volatility products, a simple model was created to calculate the expected
underperformance of a given ETF based on its day-to-day volatility."
https://www.elitetrader.com/et/threads/how-long-can-you-safely-hold-3x-leveraged-etf.372366/
 
Hello everyone good day, please I just joined this please I would if I could discuss with you guys. Thanks.
 
easymon1 said:
In this example a month 6/1 to 7/1 can be possible before leverage-induced decay sets in
but woe is he who holds during a downturn, eg 10/1 to 11/1.

View attachment 304921
https://seekingalpha.com/article/4107640-playing-fire-how-long-can-you-safely-hold-3x-leveraged-etf

"Over longer periods, (Longer Than what?) returns can vary significantly from its headline 3x exposure to the S&P 500."

6 business days - These figures are taken from chart prices to simulate holding for 6 business days.

Gain of price compared between SPY and UPRO, a SPY 3X levered etf.
SPY +4.41%, buy date 01/19 13:00, exit date 01/27 EOD
UPRO +13.35%. ditto.

Understood:
UPRO, as a leveraged product, is not a buy-and-hold ETF, it’s a short-term tactical instrument.
Like many leveraged funds, it delivers its 3x exposure only over a one-day holding period.
Over longer periods, returns can vary significantly from its headline 3x exposure to the S&P 500.

View attachment 304924
More...

I hold them for as long as I need to reach the tp target. They perform just like any other ETF's or stocks even though they are structured differently. Why treat them differently in holding them?
 
In this example a month 6/1 to 7/1 can be possible before leverage-induced decay sets in
but woe is he who holds during a downturn, eg 10/1 to 11/1.

View attachment 304921
https://seekingalpha.com/article/4107640-playing-fire-how-long-can-you-safely-hold-3x-leveraged-etf

"Over longer periods, (Longer Than what?) returns can vary significantly from its headline 3x exposure to the S&P 500."

6 business days - These figures are taken from chart prices to simulate holding for 6 business days.

Gain of price compared between SPY and UPRO, a SPY 3X levered etf.
SPY +4.41%, buy date 01/19 13:00, exit date 01/27 EOD
UPRO +13.35%. ditto.

Understood:
UPRO, as a leveraged product, is not a buy-and-hold ETF, it’s a short-term tactical instrument.
Like many leveraged funds, it delivers its 3x exposure only over a one-day holding period.
Over longer periods, returns can vary significantly from its headline 3x exposure to the S&P 500.

View attachment 304924[/QUOTE]


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If you try to make a longer term play, you have to choose a stop-out point. Suggest stop as "breaking the major trend line" from the covid lows. Again, "Price TA".
 

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Stock indice has upside biase in long term.
Natural gas is direction neutral in long term.
That makes the difference.
Holding stock indice 3x etf is actually +EV from gambling point.
Let spx long term profit be A.
Then the worst case for UPRO is zero.
The best case for UPRO is 100x A.
While the probability of 100 A is much higher than zero.
Imagine you bet in a casino, when you lose you lose your bet;
when you win you win 100 x your bet;
and the odds is much higher in your favour.
 
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If you want to hold long term stock indice 3x etf , put 50% of your capital in tqqq, 50% in GLD.
Any time tqqq drop to 1/10 its value, sell 50% of GLD to buy tqqq.
If tqqq drop to another 1/10, sell 50% of remaining GLD to buy tqqq.
 
UGAZ is a bad example. Nowadays even BOIL (which is only 2x and also contains further out, less volatile, futures) has twice the IV of UVXY.

Holding TQQQ (i.e. a medium/low volatile asset) during a period of 10 years (before 2022) was great (i.e. way better than 3x QQQ). So you can hold them for long!
 
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