You should re-read the post
He’s not actually taking this trade - but wondering what would happen if he was short an inverse ETF and the asset it follows went to 0
If I'm short an inverse equity ETF...
- Thread starter Saltynuts
- Start date
He’s not actually taking this trade - but wondering what would happen if he was short an inverse ETF and the asset it follows went to 0
Again, if something loses X% of its value you will lose X% of your capital, unless you are using leverage.
Hmmmmm, so playing it through:
I short SH.
SH is an inverse SP500 Fund.
Assume that is a PERFECT inverse fund in that it does exactly what the SP500 does, only the inverse.
So, SP500 goes from 4165 to 0. (4165 - 0) / 4165 = 100%. SP500 is thus down 100%.
So that means SH just doubles in value, and I'm down an amount equal to my original investment?
Shit, that is not so bad. I keep reading everyone talking about potentially unlimited losses shorting, but I guess that is only shorting the longs, not shorting the shorts lol.
Of course. If you're short an issue, the most you can make is 100% (and that's only if the issue goes to zero... what does that?) But if you're long an inverse leveraged fund, you might make 3-5x or more.
%%
Exactly;
not that SPY is likely to go anywhere near zero. One of the Bright Daytrading Co execs noted a higher unemployment is maybe bullish......................................................