Leveraged Short ETFs... something wrong?

[Trader666]

Landis discussed DUG's components making the point it's important to know what's in the index you're trading. But the original post also mentioned EEV and FXP so I think it was more about the more overarching misconception that leveraged short ETFs are longer term trading vehicles when in fact they seek daily results.

Quote from chrismontez:

I think the original poster on this was addressing a misconception many of us had. When I was looking to take advantage of what I thought would be a drop in in oil from $135 I bought DUG at $27.50 as I had read several articles recommending it as a " safe" play on a drop in oil prices for those not wanting to short oil futures. I got out shortly after with a slight profit as I soon realized my mistake after watching it's correlation to energy stocks more than oil. Kicked myself in the arse when it ran up another 100%, but .... that's trading. DIG / DUG is not a play on oil.

 

[WinstonTJ]

There are correlation calculators out there on the internet. PM me if you want the link to the one that I am most familliar with.

ETFs mostly track indicies - think of them as 40 Act funds with intra-day liquidity. Add leverage and they get tricky - add optimized baskets and tracking issues and they can get confusing - but they are still just mutual funds with intra-day liquidity.

There is a clear difference between a 40 Act mutual fund and an ETF - but they are generally proxies to commodities due to restrictions and liabilities. That's an important thing to know because marketing does not always represent that (in my opinion).

 

[WinstonTJ]

Quote from Trader666:

I've been talking longer term

LEVERAGE ETFs ARE NOT A LONG TERM INVESTMENT AND SHOULD NEVER BE CONSIDERD LONG TERM INVESTMENTS.

 

[WinstonTJ]

Quote from arizonadreamer:

Thanks guys for all of your input. Very insightful. This concept of price correlation dependent upon the "path" of the particular underlying instrument is quite interesting. I will have to look into this more.

AZD

Arizona, most etf's underlying value is the ticker .iv - across the board with many companies. Look at the differences and watch, occasionally you will see a market maker go down and a specific exchange will have an offer at a premium/discount that you can capitaliza on - if not it will mostly be corrections at the open or market action at the close.

 

[Trader666]

If you calculate different scenarios you'll get a good feel for it... and if you calculate "synthetic" double short ETF prices and compare them to the actuals you'll validate it.

Quote from arizonadreamer:

Thanks guys for all of your input. Very insightful. This concept of price correlation dependent upon the "path" of the particular underlying instrument is quite interesting. I will have to look into this more.

AZD

 

[Trader666]

That's the point of this thread and the point I was making, you jackass. You're quoting me out of context.

Quote from winstontj:

LEVERAGE ETFs ARE NOT A LONG TERM INVESTMENT AND SHOULD NEVER BE CONSIDERD LONG TERM INVESTMENTS.

 

[Trader666]

I remember reading somewhere that Arizona said his holding period is weeks.

You're like ebay customer support -- mindlessly giving canned answers to questions not asked.

Quote from winstontj:

Arizona, most etf's underlying value is the ticker .iv - across the board with many companies. Look at the differences and watch, occasionally you will see a market maker go down and a specific exchange will have an offer at a premium/discount that you can capitaliza on - if not it will mostly be corrections at the open or market action at the close.

 

[arizonadreamer]

I typically enter into options positions such as spreads, condors, butterflies and strangles or combinations of the above. If the underlying is an equity, I sometimes scalp. The holding period varies depending on the position and the underlying.

The idea of arbitrage on ETFs is interesting. I was not aware that the retail guys had a chance to arb these things. To be honest, I would not even know where to start (or if I should ).

AZD

Quote from Trader666:

I remember reading somewhere that Arizona said his holding period is weeks.

You're like ebay customer support -- mindlessly giving canned answers to questions not asked.

 

[WinstonTJ]

Quote from Trader666:

I remember reading somewhere that Arizona said his holding period is weeks.

You're like ebay customer support -- mindlessly giving canned answers to questions not asked.

Quote from Trader666:

That's the point of this thread and the point I was making, you jackass. You're quoting me out of context. [/QUOTE


listen 666 - I've been on here for 1.5 days and 16 posts and at least half of my posts you have replied calling me names - how does that reflect on you? Are there forum moderators to keep people like you under control? You have no idea what my background is, what I know or don't know, etc. etc. and its going to be obvious to people on here that calling names like a child is very revealing.

grow up dude... I sent you several PMs trying to talk to you in private. Either man up and reply or stop behaving like a child. you are ruining the threads here

 

[arizonadreamer]

Winston,

Thanks for taking the time to respond.

Would you perhaps be able to give a specific example of how a retail guy might open and close an arb opportunity using the SDS as an example?

Thanks.

AZD

Quote from winstontj:

Arizona, most etf's underlying value is the ticker .iv - across the board with many companies. Look at the differences and watch, occasionally you will see a market maker go down and a specific exchange will have an offer at a premium/discount that you can capitaliza on - if not it will mostly be corrections at the open or market action at the close.