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Trading short and ultra short etfs
- Thread starter gaihosa
- Start date
Maybe a stupid question but has anyone traded short etfs. I guess basically my question is if the price of the etfs goes up then is it a loss or a profit?
Yes, it means if the price of the ETF goes up then it's a PROFIT if you bought it, since the underlying securities within the ETF went down. You are in essence "shorting" the securities by going LONG the ETF.
Remember, however, that these are DAYTRADE vehicles only, as indicated by the prospectus.
Thanks scalperjoe. That's what I was thinking but I didn't want to take a position and learn the hard way. I was hoping to trade the etfs using seasonal trading.
Like scalper Joe mentioned these are intended as daytrading vehicles. The carry cost of leveraged etfs and inverse etfs make these not that great for longer hold times
There is actually not a great "carry cost". However they do track the daily percentage return of the index, which is a very different thing than tracking the index or inverse of the index. Depending on the path the index takes this can lead to unexpected results, for example over several months a 3x fund may end up returning only 2x, 3x, or even 4x the index. However you can be assured that over the course of a single day a 3X fund will return exactly 3X the index.Like scalper Joe mentioned these are intended as daytrading vehicles. The carry cost of leveraged etfs and inverse etfs make these not that great for longer hold times
I think we need to add a bit of perspective though. We all hear that day trading isn't easy, and that swing trading gives you move time to think about your trades, as well as lessening the commissions. I'm by no means an expert on the carry costs, etc., but I can read a chart see that if, for example, DWTI was bought a couple of weeks ago, it would be nicely into profit, regardless of the costs. Perhaps shorting CL itself would have done better, who knows, but just based on what I see on the charts, there is no reason not to consider these for holding several days or maybe even several weeks if a trend is developing. If you're such an expert that you are agonizing over your 3x ETF only returning 2.5x in the same period because its been held for several weeks (if this is in fact how it works), then you probably aren't even trading ETFs anyway but doing something more sophisticated.