Short 3x etf is very high % win trade if we dont include borrow cost?

GloriaBrown · Oct 28, 2020

There is always just 3 output everyday with around this %:

raise 10%
sideways 80%
drop 10%

Short 3x etf would have 90% winning chance

Of course you would say borrow cost is crazy high

But it is not true for all 3x etf

Agree or not?

SanMiguel · Oct 28, 2020

Do you understand daily rebalancing?
Such that you lose even in a sideways market

guru · Oct 28, 2020

SanMiguel said:
Do you understand daily rebalancing?
Such that you lose even in a sideways market

I think he/she talks about shorting those ETFs, making money from those ETFs losing value. The risk would be to the upside.

BKR88 · Oct 28, 2020

I shorted a basket of leveraged ETFs for a while.
Short them in pairs so TNA & TZA, NUGT & DUST, etc. so you're always long & short in the same market.
In the long-run you'll win. The problem is you need to keep a good amount of spare margin available because occasionally these leveraged ETFs go crazy to the upside. Short @ 10 and suddenly it's 100.

Initial investment was 10K and now it's 100K. Yikes!
I was profitable with the strategy but with a strong move it can take considerable time to get back to break-even and with the spare margin required I decided it wasn't worth it.

GloriaBrown · Oct 28, 2020

guru said:
I think he/she talks about shorting those ETFs, making money from those ETFs losing value. The risk would be to the upside.

Yes exactly

wmwmw · Oct 28, 2020

There are people doing this for long time. It is just as selling out of money options.
The risk is in the tail event and don't let it blow up your account.

BKR88 said:
I shorted a basket of leveraged ETFs for a while.
Short them in pairs so TNA & TZA, NUGT & DUST, etc. so you're always long & short in the same market.
In the long-run you'll win. The problem is you need to keep a good amount of spare margin available because occasionally these leveraged ETFs go crazy to the upside. Short @ 10 and suddenly it's 100. Initial investment was 10K and now it's 100K. Yikes!
I was profitable with the strategy but with a strong move it can take considerable time to get back to break-even and with the spare margin required I decided it wasn't worth it.

GloriaBrown · Oct 28, 2020

wmwmw said:
There are people doing this for long time. It is just as selling out of money options.
The risk is in the tail event and don't let it blow up your account.

The risk is lower than short option. The exposion of long option can be so high. 3x is always 3x.

wmwmw · Oct 28, 2020

GloriaBrown said:
The risk is lower than short option. The exposion of long option can be so high. 3x is always 3x.

Not really. If you short options with a small portion of your account, the risk is also low.
It all depend on how much you want to win, so that how higher the risk you want to tolerate.

murray t turtle · Oct 28, 2020

GloriaBrown said:
There is always just 3 output everyday with around this %:

raise 10%
sideways 80%
drop 10%

Short 3x etf would have 90% winning chance

Of course you would say borrow cost is crazy high

But it is not true for all 3x etf

Agree or not?

%%
NO, not really;
but on a good downtrending day like WED, today/may be worth your while??
Wisdom is profitable to direct...……………………………………………………………………………………………………...
The inverse moves much , much different from long x3 ETF...

traider · Oct 28, 2020

BKR88 said:
I shorted a basket of leveraged ETFs for a while.
Short them in pairs so TNA & TZA, NUGT & DUST, etc. so you're always long & short in the same market.
In the long-run you'll win. The problem is you need to keep a good amount of spare margin available because occasionally these leveraged ETFs go crazy to the upside. Short @ 10 and suddenly it's 100. Initial investment was 10K and now it's 100K. Yikes!
I was profitable with the strategy but with a strong move it can take considerable time to get back to break-even and with the spare margin required I decided it wasn't worth it.

How were the fees like when you were holding them short?