Making money off a crash-not as easy as it might seem.

[bookish]

I was looking at inverse instruments that in theory increase in price when the market decreases. It doesn't actually work that way for bad news. When people start selling, they sell everything. The inverse instrument only goes up if there is someone there to buy it. If you look at recent historical crashes EVERYTHING goes down.

FYI

 

[mt2rules]

This is inaccurate. Someone doesn’t have to buy the inverse ETF for it to go up. Those funds normally have short exposure to some kind of derivative. The reason these ETFs usually lose money over time, even when the market is going down, is that markets very rarely just drop for days. The volatility drag begins to weigh on the instrument. It’s much better to trade the underlying derivative itself.

 

[bookish]

For anyone else that reads this post. Look at the charts for the major market dips in any year and compare.

 

[Clubber Lang]

For anyone else that reads this post. Look at the charts for the major market dips in any year and compare.

Those inverse ETF’s only work in very short periods of time.

 

[Spectre2007]

Easiest thing is to keep rolling short position in futures, if you believe a crash is imminent.

 

[LS1Z28]

For anyone else that reads this post. Look at the charts for the major market dips in any year and compare.

I've listed how the major market index inverse ETFs performed during the financial crisis back in 2008-09. The figures are off due to splits, but the percentage gained should be accurate.
SH went from $116 to a high of $210. (S&P 500)
PSQ went from $211 to a high of $379. (Nasdaq 100)
DOG went from $235 to a high of $375. (Dow 30)
RWM went from $222 to a high of $504. (Russell 2000)

What inverse ETFs specifically have you seen that haven't reacted rationally to a crash?

 

[ET180]

I think the only reason that these 3X short instruments exist is for non-margin or IRA accounts that cannot short. Otherwise, I don't see any reason why someone would use them vs. buying puts or shorting the underlying directly.

 

[TDMA]

I was looking at inverse instruments that in theory increase in price when the market decreases. It doesn't actually work that way for bad news. When people start selling, they sell everything. The inverse instrument only goes up if there is someone there to buy it. If you look at recent historical crashes EVERYTHING goes down.

FYI

Of course it's horribly complicated, countertrend is like leverage on leverage, one mistake and you lose your capital. Yes it's true everything is correlated these days, but they don't normally all go down at once. The chance of you timing a countertrend is near zero, but if you do you can generate 10x or 100x daytrading returns.

We use countertrend in the dark pool funds and dark pool exchange, I've only done one crypto trade this year, but netted 300% return on it, and only a few capital market trades but netted 15%-20% per day, you do the math, but get it even fractionally wrong and you will lose your shirt.

 

[DeltaRisk]

I was looking at inverse instruments that in theory increase in price when the market decreases. It doesn't actually work that way for bad news. When people start selling, they sell everything. The inverse instrument only goes up if there is someone there to buy it. If you look at recent historical crashes EVERYTHING goes down.

FYI

It’s interesting you say that.
You might want to check daily historical prices, most inverse ETF’s weren’t created until 07’ *wink wink*

 

[tomorton]

If you're talking about stick index ETF's, betting on indices falling is as said above good for short-term only. The stock indices are one market where the game is definitively rigged, i.e. weakening index constituents are continually being culled out and stronger ones replacing them, so the natural tendency is for indices to rise.