The Myth: 3x ETFs good only for short term...

Leveraged ETFs employ such a horrible rebalancing strategy. You're far better of manually running a strategy in leveraged futures or QQQ that can take some heat before downsizing. Likewise unconditionally levering up on favorable price moves is only a great strategy in hindsight.
 
Here's UOPIX (leveraged Nas fund... red) vs QQQ back to late 1997. I'm sure y'all can justify anything that suits you about this. :)

UOPIX VS QQQ.PNG


The big decline on the left in UOPIX was from 147.99 to 6.47, according to FastTrack. It's leveraged "only" 2:1. TQQQ, which wasn't around back in the late '90s, is leveraged 3:1. Had it been around then, it would have suffered even a bigger percentage loss.

Worst case scenario here if you're a B&H-er... you might have been holding for ~10 years while sitting on ~96% loss. Not sure how anyone can justify that nor can his investing psyche handle it. (I have a trader friend who is doing something similar... he shorted in 2011 in a leveraged ETF and is still holding.)
 
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Scataphagos said:
Here's UOPIX (leveraged Nas fund... red) vs QQQ back to late 1997. I'm sure y'all can justify anything that suits you about this. :)

View attachment 269366

The big decline on the left in UOPIX was from 147.99 to 6.47, according to FastTrack. It's leveraged "only" 2:1. TQQQ, which wasn't around back in the late '90s, is leveraged 3:1. Had it been around then, it would have suffered even a bigger percentage loss.

Worst case scenario here if you're a B&H-er... you might have been holding for ~10 years while sitting on ~96% loss. Not sure how anyone can justify that nor can his investing psyche handle it. (I have a trader friend who is doing something similar... he shorted in 2011 in a leveraged ETF and is still holding.)
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I was able to redo this from the 1st common date in 1999. This time QQQ is red.

UOPIX VS QQQ.PNG
 
shatteredx said:
Yes, you're right that leveraged ETFs have done well over the past 20 years. Other people have already busted the myth that you can't hold them long term. There's a nice write-up here: http://www.ddnum.com/articles/leveragedETFs.php It shows that since 1885, the optimal leverage has been 2x (optimal leverage since 1950 has been 3x).

However:

1. If TQQQ had existed in 1999, it probably would have gone down very close to 0 during the dot com bubble.
2. Google "XIV" if you're not familiar with it already, it's a nice example of a leveraged ETF that blew up. To be fair, it was IMO extremely obvious that it would blow up.

I think some of the leveraged oil ETFs blew up last year too. Is it possible for the S&P to drop 33% in one day nowadays to trigger a blow up in UPRO? Are you willing to bet your entire brokerage account?
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%%
Good points;
but'' close'' doesn't really count except horse shoes + hand grenades.
And its not a'' bet'' even though i see your point on some diversification. OK
Almost impossible for SPY to drop 33.3% in one day;
but I've read the multihunderd page annual report/prospectus.
Some funds allow this \ say SPY+ it dropped 33.3% OCT 19, 1987;
some allow for settling OCT 20, 1987. IF that makes no sense dont worry + read the prospectus
 
buying Micro and mini NASDAQ futures is far more efficient, you get 10x and 0% management fee

contracts as cheap as 2,500 USD for a 5x multiplier

but regulatory oversight by the CFTC is far worse than anything, they ask you all kind of questions to make sure you are not a drug lord or gaming the market with some "offshore" hidden interests :)

so looks like I will have to do with 3x ETFs now :p
 
Snuskpelle said:
Leveraged ETFs employ such a horrible rebalancing strategy. You're far better of manually running a strategy in leveraged futures or QQQ that can take some heat before downsizing. Likewise unconditionally levering up on favorable price moves is only a great strategy in hindsight.
More...
amen to that brother, but keep in mind that opening a Futures account these days is far more difficult than a regular trading account, CFTC rules etc...

so access to Futures through a 3x ETF is also a nice and safer alternative for those who don't have the gut with Futures and the 10x returns it gives on traded indexes
 
Snuskpelle said:
Leveraged ETFs employ such a horrible rebalancing strategy. You're far better of manually running a strategy in leveraged futures or QQQ that can take some heat before downsizing. Likewise unconditionally levering up on favorable price moves is only a great strategy in hindsight.
More...
%%
Amen to that;
mostly
Prefer TQQQ,spxl, qld/dividends;
qqq very seldom\ except trying to prove a bottom not pick a bottom. I dont like stuff could possibly geta margin call under any case or get sued for the balance in RE loan.
 
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