Everyday Finance

Etf investing, independent research, tech
Everyday Finance
ETF investing, independent research, tech
Contributor since: 2007
Turkey is an associate member of the EU; author noted that they are NOT part of the monetary union. Before you stop reading, read the rest of the sentence.
btw, http://bit.ly/UJHGKF
You disagree based on what? While passive funds usually beat actively managed, that was the point of this article - it defies the typical trend and full background/rationale included. The data is the data; the ETF is beating the indices over time.
Mmm, no. We review various ETFs weekly when they look interesting. Never any contact with ETF or mutual fund companies and this article was not overly "glowing", but factual. Take a look at some other articles for a feel on what we normally cover. Same vein as most ETF reviews, unless fo course you think every ETF company has contacted us.
If they enact legislation to reign in future entitlement spending, you don't think that would be a positive for the creditworthiness of the US?
Odds are for an Obama reelection;' the intent of this piece was to focus on what might happen in the event of a Republican win with Ryan's more hawkish budget recommendations compared to Romney's, well, lack of budget details at all... and the WH failing to publish a budget for 3 years running
The downgrade was only 1 of thousands of variables that have affected rates since then. Operation twist, Europe in flames, conflict in the middle east, etc. The world is a mess and the US is the "least ugly" option in a fearful market.
So, at this time, Apple is down 2.2%, SPY is down .79% and RSP is down .69%. If you like Apple so much, why don't you just buy the stock?
From May2003 when started, RSP returned 95%, SPY returned 48%.
Enough said
Or... you can always just check out the equal-weighted ETFs which negate the heavy-weighting of Apple and take a neutral stance on all stocks: http://seekingalpha.co...
The performance speaks for itself; probably lower volatility, less prone to crashes since the highest beta stocks tend to fall faster than the market at large. Have an open mind!
Yes, dividends owed will be equivalent to the leverage too. However, it's often a tech or commodity ETF or something with no/low ETF involved, so not so much of an issue. Something like Financials (back when they paid dividends) or even S&P500 might be more meaningful, but even at like 6% a year, pales in comparison to effect of value loss.
Now we learn Zynga isn't doing so well either. And Groupon misled on revenues and had to restate. Anyone ready to eat their hat yet?
Groupon is a mess; the storm is coming.
Huh? I used SPY and UPRO bc they're based on the same underlying index. What does SPY have to do with ERX? Nothing.
ERX and ERY - you've gotta go back and re-read the article. Since leveraged ETFs tend to decay in value over time, the whole point is by shorting pairs, you can make money regardless of market direction. Go plot ERX and ERY in google finance since inception. ERY is down 95%, ERX is up only 55%. So that's a net 40% gain. in 2.5 yrs. not too shabby
I looked at that strategy too. Requires more capital obviously since you're holding the underlying, but if you believe the general trend of market over the long-term is up, as long as it doesn't move up rapidly without a correction (like it did in 2010 to present), you're OK. If it's a crazy up-move, you can still lose more in the short position than you gain in the long. Just chart out some scenarios and you'll see.
A couple thoughts.
First off, I monitor the price and simply buy back the put if it drops appreciably below strike. When option premium still exists on the option, nobody on the other end is going to buy it back unless they're dumb. So, I allow premium to tick off and capture those dollars. Then, as your question asks, if it approached 45, then I'd simply buy back the put for what might amount to a $620 loss on paper as you suggest, so $10,000 not required.
The part you didn't factor in though, is that if gas prices are that low, our personal family expenditures for gas will have dropped considerably as well, very much offsetting this $620 loss, as unlikely as that is to see a 25% drop in gas prices going into summer driving season.
Totally; airlines and corporations use oil futures, hedge currencies and the large companies have an entire treasury dept doing this stuff. Personally, using futures, dealing with contango, roll yield, etc is more than i want to manage. I've done this a few times and it keeps working out. net neutral or gain for me each time depending on what happens to gas.
Hi Steve,
I never recommend buying and holding a long or a short leveraged ETF. They all go to zero eventually. There are a few strategies within, but if you're bullish in general, short just the "short" leveraged ETF or to capture gains in a flat market short both sides (long and short) of the same underlying index. So, short BOTH AGQ and ZSL simultaneously in your example.
I like SLW but figured due to individual company operational risk, would stick to broader miner ETF. Of the individuals, I do like SLW the most.
that's because leveraged ETFs decline in a sideways market. So, OPTIMAL time to short them!
Curious how you arrived at those numbers. Check out FAS vs FAZ during 09, etc; they each lost tons of value on both ends.
I've done great in that one since so damn volatile coming out of the bailouts. Could have a runaway situation if market continues to rally, but unlikely IMO. I like it.
Not necessarily. The premiums you pay on options should account for the known value decay (cat's out of the bag by now; I wrote about this over a year ago). Notice how put options are always more expensive than call options for at the money/same duration? That's often the case with regular stocks too, but much moreso with leveraged ETFs.
Admittedly, I did buy long-term put options on both long and short ends a while back and it happened to work out, but I think it was more luck than anything else. In modeling out some other scenarios, I would have lost money since you're seeing premium tick away day by day when you buy a long option.
Whoah - find a new broker? I use Ameritrade and there's no charge. Granted, you have to have margin access enabled, but I don't pay an actual fee (or margin) as long as I have adequate cash and securities on hand. I use this to supplement my regular investment account returns.
It's just the way the math works out. Set up your own spread sheet with a 1X and a 3X investment side by side and you'll see.
Yup, hence why I shared my story of the runaway train. There's risk.
Just check out the excel example above. the numbers tell the story.
The intent wasn't to impress. It was an interim report on a strategy whereby the actual direction of silver doesn't matter and you can profit regardless. If you believe in miners that much, please, mortgage the house, borrow on leverage and bet everything; be my guest. For those that believe in at least a moderate level of market efficiency and that the current prices reflect present value and information in the marketplace, then a pairs trade is a wonderful tool.
Zero outlay, no beta/correlation, very low risk for the reward, infinitely scalable.
What am I missing?
Sorry, you guys either didn't read or don't comprehend the concepts outlined in the original article. Or you are hysterical conspiracy theorists. The premium will continue to compress. When premiums are in the mid-20s, pairs trade. When mid-teens, unwind trade. Repeat and profit.
It's pretty simple, demonstrated to have been successful over and over. Just look at the distribution chart.
Well, that's the whole premium compression/expansion question. By relying on months of history with both the gold (PHYS) and silver (PSLV), one can reasonably deduce where the premium should reside over a long period of time. We are presently way above the mean, and had been especially so at time of initial publication earlier in week.
You misunderstand.
It doesn't matter if silver moves up or down. The strategy works either way. This is simply about premium compression on the CEF.
So, no affiliation with JPM nor interest in actual directional movement of SLV...
Premium had dropped to 21% as of Thursday; down to 19% on Friday. Not to say "I told you so", but...well, thought worth highlighting...
That's now a 5% gain in 2 days on a $0 net investment (OK, 20 bucks on commissions).
Not too shabby!
You share no facts to support your assertion. Look at the history of PHYS and GLD and the history of premiums on PSLV. How would one get killed, you expect the premium to skyrocket to 50%? Sure I'll keep holding my breath...