how to hedge a 3x etf

[sandp500trader]

Let's see, if it goes to one dollar and you do a 10 for 1 reverse split, the price then goes to 10 dollars. If it goes back to one dollar, and you do a 10 for 1 reverse splits, then price goes to 10 dollars, and on, and on, and on.....

I don't think I'm the one who failed math class here. I'm still beyond amazed that you don't know this. This is not even a real question.

 

[srinir]

It is portfolio that matters. Leverage etf is not evil, as long one knows how to use it.

Here is a backtest of SSO, TLT (30%,70% Portfolio1) comparing with SPY,TLT (60%,40% Portfolio2) which accounts for twice the leverage rebalanced annually. Test period includes brutal bear market and subsequent bull market, so fair comparison.

https://bit.ly/2PGLnRi

 

[Sig]

Let's see, if it goes to one dollar and you do a 10 for 1 reverse split, the price then goes to 10 dollars. If it goes back to one dollar, and you do a 10 for 1 reverse splits, then price goes to 10 dollars, and on, and on, and on.....

I don't think I'm the one who failed math class here. I'm still beyond amazed that you don't know this. This is not even a real question.

Brilliant, you are clearly smarter than the CFO of every company whose stock actually did go to zero. They all could have just done an infinite number of reverse splits and they'd still be a going concern! If only they'd known someone of your stunning intellect! You must be a billionair with this perpetual motion equity machine you've got going?

The Dunning Kruger effect is strong in this one.

 

[sandp500trader]

Are you back testing with actual price data? Charting software will smooth out the price, so you're not automat

Brilliant, you are clearly smarter than the CFO of every company whose stock actually did go to zero. They all could have just done an infinite number of reverse splits and they'd still be a going concern! If only they'd known someone of your stunning intellect! You must be a billionair with this perpetual motion equity machine you've got going?

The Dunning Kruger effect is strong in this one.

You can't do reverse splits to infinity if you are a company. The real value is actually much, much lower than the actual stock price, which is can work with a 3x ETF but not with a real company.

 

[sandp500trader]

It is portfolio that matters. Leverage etf is not evil, as long one knows how to use it.

Here is a backtest of SSO, TLT (30%,70% Portfolio1) comparing with SPY,TLT (60%,40% Portfolio2) which accounts for twice the leverage rebalanced annually. Test period includes brutal bear market and subsequent bull market, so fair comparison.

https://bit.ly/2PGLnRi


View attachment 190425

First of all, 2x aren't as dramatic as 3x. Secondly, in a long move in a steady direction, the funds will perform close to what you expect. In volatile up and down markets they get slaughtered. Look at SDS instead of SSO. With a 10K investment in 08, it would now be worth less then 400. Even if the market crashed 50%, and did so quickly, SDS would only be at less than 1, 000. Crash another 50% again quickly, and it would still be less than 2, 500, even though the market would be lower than where it was bought with the 10K. In other words, that 10K, will never be reached again. This is because of the deteroriation of the leveraged ETFs. They all end up at zero. It may take awhile, but their goal is zero.

 

[Sig]

Are you back testing with actual price data? Charting software will smooth out the price, so you're not automat

You can't do reverse splits to infinity if you are a company. The real value is actually much, much lower than the actual stock price, which is can work with a 3x ETF but not with a real company.

It's pretty sad that you seem to actually not realize that you're spouting gibberish. What do you actually do for a living that this intellect can support, I'm genuinely curious?

 

[srinir]

First of all, 2x aren't as dramatic as 3x.

Ok. Here is the portfolio TQQQ/TLT (20/80 Portfolio1) vs QQQ/TLT (60/40 Portfolio2). Three times leveraged yearly rebalanced. Dataset is not longer, but never the less still performs better.

In volatile up and down markets they get slaughtered.

Then you don't know how to use leveraged etf, stop complaining. If it is volatile up and down rebalance much frequently or reduce the leverage.

Look at SDS instead of SSO. With a 10K investment in 08, it would now be worth less then 400.

Looks like you are clue-less. Why would i use SDS instead of SSO? One is short other is long. I am comparing long portfolio's here.

 

[sandp500trader]

Just look up SDS. When even a 2x leveraged ETF, only ends at zero. A 3x would do so even quicker. I really don't know how to spell this out to you all more clearly.

 

[srinir]

I give up.

You started saying this

That's what I was asking, do you understand that over time all 3 times ETFs end up at zero? I didn't mean on one day, but over time.

I showed above that, when two portfolio's with the same initial dollar amount invested over longer period leveraged etf portfolio in-fact did better. Now you are just repeating look at the chart. Chart does not tell you squat, when leverage is involved. It is better to look at same initial dollar outlay of the typical investor and then compare.

 

[sandp500trader]

Ok. Here is the portfolio TQQQ/TLT (20/80 Portfolio1) vs QQQ/TLT (60/40 Portfolio2). Three times leveraged yearly rebalanced. Dataset is not longer, but never the less still performs better.
View attachment 190427


Then you don't know how to use leveraged etf, stop complaining. If it is volatile up and down rebalance much frequently or reduce the leverage.



Looks like you are clue-less. Why would i use SDS instead of SSO? One is short other is long. I am comparing long portfolio's here.

Yes, in a market that is generally one direction, the ultra ETFs will survive. Once the market turns choppy, they will deteriorate much much more quickly. Again, look at SDS. The market could trade well below where initial entry was made 10 years ago, and one wouldn't even be close to recouping their original investment. Why is this? What magic is taking place here?