I am a newbie and want to swing trade leveraged ETF, read some posts online, feel like Leveraged ETF only for day trading or 3-5 days trading, since it will decay, also will be charged on higher fees than regular ETF. Here is my stupid question, from 8/7 to 8/29, TQQQ moved from 74.24 to 88.98, it is a $14.74, a 19.8% increase. If I bought at 8/7 low and hold 22 days and sold at 8/29 high, do I really get $14.74 profit? Or this is not true, the broker will deduct some fees and reduce the decay for past 22 days? Then I will get far less profit than $14.74? Thank you for your answer.
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Leveraged ETF will bad?
- Thread starter YoungTiger
- Start date
No, you will get that amount, minus commissions (which should be pretty minimal) and the spread (again if you're trading liquid leveraged ETF's should be minimal). Decay should be factored into the NAV.
The fact is, leverage is great if you're right about the direction and timing of a move. As an example, buying and holding SPXL (3x S&P) from the low in March of 09, would have you up 1,600%.
Leverage will destroy you if you're wrong though. If you bought SPXS (short version of SPXL), you would be down 99%.
Leverage is not as mystical as some try to make it. When you boil it down, leverage works in your favor when you're right. It works against you when you're wrong.
The fact is, leverage is great if you're right about the direction and timing of a move. As an example, buying and holding SPXL (3x S&P) from the low in March of 09, would have you up 1,600%.
Leverage will destroy you if you're wrong though. If you bought SPXS (short version of SPXL), you would be down 99%.
Leverage is not as mystical as some try to make it. When you boil it down, leverage works in your favor when you're right. It works against you when you're wrong.
There is no time decay in leveraged ETFs - I have done my own tests (it is math intensive, so I assume most of people would be not interested...) after one guy told me that he has good FAS/FAZ system. My conclusion was that his system has no edge despite backtests and his live trading were so far profitable...
If someone will be interested in my tests and conclusions about leveraged etfs time decay, let me know.
Some info about it from other guy is here:
http://matlab-trading.blogspot.co.at/2011/05/guess-what-leveraged-etfs-dont-decay.html
If someone will be interested in my tests and conclusions about leveraged etfs time decay, let me know.
Some info about it from other guy is here:
http://matlab-trading.blogspot.co.at/2011/05/guess-what-leveraged-etfs-dont-decay.html
Clacy, thanks a lot for your post.
FAS/FAZ been steady for me in long term and swing trading the underlying, but took losses on the options as volume not the best as I was trying to swing trade them, lol build up some profit and by time I can get out, in the hole. Perhaps much better strategy for covered calls or sell puts to expire worthless.There is no time decay in leveraged ETFs - I have done my own tests (it is math intensive, so I assume most of people would be not interested...) after one guy told me that he has good FAS/FAZ system. My conclusion was that his system has no edge despite backtests and his live trading were so far profitable...
If someone will be interested in my tests and conclusions about leveraged etfs time decay, let me know.
Some info about it from other guy is here:
http://matlab-trading.blogspot.co.at/2011/05/guess-what-leveraged-etfs-dont-decay.html
Why does he trade both? Retirement accounts I suppose cause most can't/won't short?
FAS/FAZ been steady for me in long term and swing trading the underlying, but took losses on the options as volume not the best as I was trying to swing trade them, lol build up some profit and by time I can get out, in the hole. Perhaps much better strategy for covered calls or sell puts to expire worthless.
Why does he trade both? Retirement accounts I suppose cause most can't/won't short?
Retirement account?
I do not trade retirement account, people around me do not trade retirement accounts - no one. We are all active traders.
Why does he trade both FAS&FAZ?
1. I dunno if he still trade it.
2. He has traded it as pair if I remember well (FAS hedged by FAZ) and assumed that because of time decay he will make money over time... but because there is no time decay, his profits was just matter of luck ;-)
%%I am a newbie and want to swing trade leveraged ETF, read some posts online, feel like Leveraged ETF only for day trading or 3-5 days trading, since it will decay, also will be charged on higher fees than regular ETF. Here is my stupid question, from 8/7 to 8/29, TQQQ moved from 74.24 to 88.98, it is a $14.74, a 19.8% increase. If I bought at 8/7 low and hold 22 days and sold at 8/29 high, do I really get $14.74 profit? Or this is not true, the broker will deduct some fees and reduce the decay for past 22 days? Then I will get far less profit than $14.74? Thank you for your answer.
Young T;
Your question was more right than you thought.Not because of decay, or the small management fee, or commissions/slippage.The main reason is most of the time you will not buy the low + sell the HI,[$14.74 profit] even when you are right on the trend. Good question;bull markets tend to be orderly+ strong in last quarter of year.Not a prediction