Everyday Finance

Inverse (Short) Market Cap ETFs

Now, the 3x's are out in force and can both a blessing and a curse. Near term, the leverage is great and they roughly track the underlying index 3X. Over a period of months or a year, the tracking error is horrendous. I've provided this in a visual format here showing what happened to the Financials over a period when the 3X short FAZ should have completely killed. Any investor considering using 2X and 3X daily rebalanced ETFs should be fully educated on the likely outcome of holding a depreciating asset more than a few days.

www.darwinsfinance.com.../

Zep, with Emerging markets as volatile as they are, again, the long term return on either long or short will look nothing like the underlying index.

Understanding Triple Leveraged ETFs

In early March, I had entered into a hedged combination of ETF long and option calls strategy. It's worked out well, but primarily only due to the mass move upward that insued (I got very lucky w timing), which I had somewhat expected (or else I would have taken a bath on both sides of the position). Somewhat long explanation, but if you believe Financials have much more up/down exposure, this can work in a hedged fashion:
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