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Leveraged Short ETFs... something wrong?
- Thread starter gnome
- Start date
Quote from gnome:
My perception is that DIG correlates reasonably as it should, DUG does not...
DTO/DXO track oil.
DUG's runup, then down over the last year demonstrate that there's a range of oil prices/demand levels/economic predictions/everything else that determines whether or not the market believes that oil COMPANIES will be profitable.
Do you need a tissue?
P.S. Still have only received ONE PM.
P.S. Still have only received ONE PM.
Quote from winstontj:
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
guys - it is VERY hard to arb in the secondary market because you can not create/redeem shares directly to the fund company.
You have to watch the tickers. I'm very limited as to what i can do trading-wise because #1, i work for one of these ETF companies and #2 I get paid to work for an ETF company, not to day-trade.
Arizona - you ask for SDS, (i don't work for that company) SDS = 2x short SNP 500. So, this is a daily beta ETF, SNP goes down 1%, sds *should* go down 2% (minus fees, expenses, etc. which I believe we are all at 0.95%). So S&P down 1% SDS down 2%
This is a VERY liquid ETF so arb opportunities are going to be hard to come by and not very large - take a look at higher leverated ETFs and less liquid sectors rather than S&P...
You guys see a down turn signal coming into the close, at 3:55pm EST - guys decide to start buying SDS thinking it will go up. They buy so much that the price of the ETF moves above the underlying market value of the S&P stock basket... now your share of SDS is worth more than what is behind it.
Either - short the SDS (short the short) or look to the bull/long side to see if it happens there (SSO). Often times these market action discrepancies will happen equally across the pairs - as you see that SDS is worth more than the S&P, look to the SSO, market action may have driven SSO sown below the underlying value of SSO.IV.
Unfortunatley because you are not an Authorized Participant in the Primary market you can not buy/sell from the fund company and Arb these things easily - you can only capitalize on the market action on the long side.
Watch the iNAV values and if the share is trading above the underlying value, look to the opposite pair because the correction will be inverse. I have found that it is hard to short ETFs - not always available.
Does this make sense?
You can't really short a third instrument knowing that the secondary proxy is out of allignment. Although, depending on how big you are and who you trade through, your traders may be able to make arb markes for you and capatilize on this stuff.
sorry if I wasn't articulate enough to explain clearly
You have to watch the tickers. I'm very limited as to what i can do trading-wise because #1, i work for one of these ETF companies and #2 I get paid to work for an ETF company, not to day-trade.
Arizona - you ask for SDS, (i don't work for that company) SDS = 2x short SNP 500. So, this is a daily beta ETF, SNP goes down 1%, sds *should* go down 2% (minus fees, expenses, etc. which I believe we are all at 0.95%). So S&P down 1% SDS down 2%
This is a VERY liquid ETF so arb opportunities are going to be hard to come by and not very large - take a look at higher leverated ETFs and less liquid sectors rather than S&P...
You guys see a down turn signal coming into the close, at 3:55pm EST - guys decide to start buying SDS thinking it will go up. They buy so much that the price of the ETF moves above the underlying market value of the S&P stock basket... now your share of SDS is worth more than what is behind it.
Either - short the SDS (short the short) or look to the bull/long side to see if it happens there (SSO). Often times these market action discrepancies will happen equally across the pairs - as you see that SDS is worth more than the S&P, look to the SSO, market action may have driven SSO sown below the underlying value of SSO.IV.
Unfortunatley because you are not an Authorized Participant in the Primary market you can not buy/sell from the fund company and Arb these things easily - you can only capitalize on the market action on the long side.
Watch the iNAV values and if the share is trading above the underlying value, look to the opposite pair because the correction will be inverse. I have found that it is hard to short ETFs - not always available.
Does this make sense?
You can't really short a third instrument knowing that the secondary proxy is out of allignment. Although, depending on how big you are and who you trade through, your traders may be able to make arb markes for you and capatilize on this stuff.
sorry if I wasn't articulate enough to explain clearly
Winston,
Yes, that makes sense. But if you short an "overpriced" ETF or buy and "underpriced" ETF, how do you lock in a gain? In other words, what is the specific course of action?
AZD
Yes, that makes sense. But if you short an "overpriced" ETF or buy and "underpriced" ETF, how do you lock in a gain? In other words, what is the specific course of action?
AZD
Quote from winstontj:
guys - it is VERY hard to arb in the secondary market because you can not create/redeem shares directly to the fund company.
You have to watch the tickers. I'm very limited as to what i can do trading-wise because #1, i work for one of these ETF companies and #2 I get paid to work for an ETF company, not to day-trade.
Arizona - you ask for SDS, (i don't work for that company) SDS = 2x short SNP 500. So, this is a daily beta ETF, SNP goes down 1%, sds *should* go down 2% (minus fees, expenses, etc. which I believe we are all at 0.95%). So S&P down 1% SDS down 2%
This is a VERY liquid ETF so arb opportunities are going to be hard to come by and not very large - take a look at higher leverated ETFs and less liquid sectors rather than S&P...
You guys see a down turn signal coming into the close, at 3:55pm EST - guys decide to start buying SDS thinking it will go up. They buy so much that the price of the ETF moves above the underlying market value of the S&P stock basket... now your share of SDS is worth more than what is behind it.
Either - short the SDS (short the short) or look to the bull/long side to see if it happens there (SSO). Often times these market action discrepancies will happen equally across the pairs - as you see that SDS is worth more than the S&P, look to the SSO, market action may have driven SSO sown below the underlying value of SSO.IV.
Unfortunatley because you are not an Authorized Participant in the Primary market you can not buy/sell from the fund company and Arb these things easily - you can only capitalize on the market action on the long side.
Watch the iNAV values and if the share is trading above the underlying value, look to the opposite pair because the correction will be inverse. I have found that it is hard to short ETFs - not always available.
Does this make sense?
You can't really short a third instrument knowing that the secondary proxy is out of allignment. Although, depending on how big you are and who you trade through, your traders may be able to make arb markes for you and capatilize on this stuff.
sorry if I wasn't articulate enough to explain clearly
in my experience the only thing you can do is to buy an underpriced ETF and wait for the lead market makers to arb it back in line.
I may be totally wrong - again i'm not a day-trader - but I think you'll have a very hard time shorting 2x & 3x etfs, nevermind shorting the shorts...
So its tricky, you can look to buy the underpriced and when you see something overpriced know to look at the inverse pair - but it may not always work.
These things are built to be arb'd back into line with the underlying so the more liquid the index is the harder it will be to arb - you asking about the S&P... honestly - probably not going to happen. If you look at some of the higher leverage ETFs and less liquid sectors, you'll see some opportunities.
Don't forget about overnight risk, If something trades at a premium/discount at night, it will correct at the open the next day (most likely)
I may be totally wrong - again i'm not a day-trader - but I think you'll have a very hard time shorting 2x & 3x etfs, nevermind shorting the shorts...
So its tricky, you can look to buy the underpriced and when you see something overpriced know to look at the inverse pair - but it may not always work.
These things are built to be arb'd back into line with the underlying so the more liquid the index is the harder it will be to arb - you asking about the S&P... honestly - probably not going to happen. If you look at some of the higher leverage ETFs and less liquid sectors, you'll see some opportunities.
Don't forget about overnight risk, If something trades at a premium/discount at night, it will correct at the open the next day (most likely)
Quote from Trader666:
Troll you say turdo? If you had a brain you'd realize that I put out simple, tradable information about leveraged ETFs that can even be used in IRAs.
I better look harder for the nuggets of gold between your anatagonistic and caustic responses in this thread, my bad.
At least I'm not a hypocrite... anyway, it's really MY bad for overestimating your IQ.
Now why don't you be a good boy and take your own advice and put me on iggy.
Now why don't you be a good boy and take your own advice and put me on iggy.
Quote from Surdo:
I better look harder for the nuggets of gold between your anatagonistic and caustic responses in this thread, my bad.
"guys - it is VERY hard to arb in the secondary market because you can not create/redeem shares directly to the fund company. "
Well here is my arb story- when they 1st started trading options on the VIX I noticed the near month calls were priced higher than the far month calls. I figured it was a pricing glitch and jumped on that with calendar spreads thinking I had hit free money. heh, heh, heh, Managed to get out of the trade with a tiny profit once I figured out that the near month calls could expire at a much higher price than the far month calls that still had a month's time left on them if sentiment was the market would go up.
Free money in the market is hard to come by.
Well here is my arb story- when they 1st started trading options on the VIX I noticed the near month calls were priced higher than the far month calls. I figured it was a pricing glitch and jumped on that with calendar spreads thinking I had hit free money. heh, heh, heh, Managed to get out of the trade with a tiny profit once I figured out that the near month calls could expire at a much higher price than the far month calls that still had a month's time left on them if sentiment was the market would go up.
Free money in the market is hard to come by.