ProShares Ultra Utilities (UPW)

All Comments on UPW

  • commenter
    Kunst
    Apr 03 02:00 AM
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    (1 + x) * (1 - x) = 1 - x^2

    (1 + 2x) * (1 - 2x) = 1 - 4x^2

    Still, if you get the direction right, the 2x should still put you ahead more than the 1x, but not twice as much. If you get the direction wrong, you are in a world of hurt. In a trading range, the above formulas show that the ultra bleeds you much faster than the straight.

    This is true of both ultra and ultrashort.     Reply
  • commenter
    Michael
    Bommarito
    Apr 01 02:28 PM
    My Website
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    Also, in response to User 170913, I've used adjusted close values for these calculations, so the dividends are already incorporated. Reply
  • commenter
    Michael
    Bommarito
    Apr 01 02:22 PM
    My Website
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    All numbers I use in calculations are cumulative log-returns, so Ben and Cato's comments are not relevant. The bar charts are endpoint cumulative log-return comparisons converted to standard %-return. Reply
  • commenter
    sammyg123
    Apr 01 02:27 AM
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    Yeah. These are good vehicles for short term plays for sure. Reply
  • commenter
    cato
    Apr 01 12:53 AM
    My Website
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    Bingo Ben! People get confused and think these funds will attempt to track 2X (or -2X) over the course of a year. In fact, their goal is to do it _every day_.

    Whether you realize it or not, a 2X fund is an implicit momentum play, since it reloads every day. It will always force you to buy a little more at higher prices and a little less at lower prices. If the market goes up and down a lot over a year and then ends the year unchanged, you will lose a lot of money!

    Reply
  • commenter
    Ben
    Davenport
    Apr 01 12:01 AM
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    I think your fundamental premise that the cumulative returns must be the negatives of one another is wrong. Take the following example of an ultra-long etf ULX and and ultra-short etf USX. Assume both start at 100.

    On day 1, let's say the index moves up 25%. ULX should move up 50% to 150, while USX loses 50% to close at 50. Now, on the second day let the underlying index lose 15%. That means that ULX loses 30% (45) to close at 105, and USX gains 30% to end at 65.

    So, at the end of 2 days, ULX now has a return of +5%, while USX has a whopping -35% loss. So, even with perfect tracking, you do NOT get what you expect.

    In other words, it makes a difference whether you lose x% and then gain y% than to gain y% and then lose x%. Therefore, your chart is not really telling us much of anything useful.     Reply
  • commenter
    Michael
    Bommarito
    Mar 31 11:06 PM
    My Website
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    Roger & 2TallTurk, note that I'm not talking about whether these funds return twice their underlying index's price return. I point readers to the ProShares article on the difference between daily NAV tracking and cumulative price return...

    What I *am* investigating is why the daily NAV return for these fund pairs do not match. That is, the daily NAV return of UYG should be the negative of the daily NAV return of SKF.

    2TallTurk, note that I readily accept tracking error from portfolio construction. These ProShares funds have done well considering that the difficulty of matching the magnitude of returns lately. I was merely investigating alternative reasons for the imbalance.     Reply
  • commenter
    User 170913
    Mar 31 11:05 PM
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    These funds also issue dividends. Have you taken those into account? Reply
  • commenter
    2TallTurk
    Mar 31 10:17 PM
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    I have traded the +/-2 beta funds at Profunds and Rydex since 1998. Yes, there is tracking error. It is difficult to do what these companies are trying to do and they do a very good job. You are still better off using these products than using +1/-1 beta products on 50% margin. Also if you trade for very short periods 1-10 days, the cumulative tracking error for your long and short moves is a fraction of staying on one side for several months at a time. Reply
  • commenter
    Roger
    Nusbaum
    Mar 31 09:33 PM
    My Website
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    Unless I missed it in your article you did not mention that the funds' objective is to capture whatever it is supposed to capture on daily basis. Given that fact doing a study like the one charted from 8 or 9 months ago tells us nothing about the future. The outcome looking forward depends on how the various underlyings zig and zig.

    Example; for all of 2007 the double long SPX ETF lagged SPY.     Reply
  • commenter
    GKM
    Mar 31 07:06 PM
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    SHB, I think there is an arb play in there. If you pick a very volatile day, then short the ultrashort and short the ultra you should be able to make a spread over time. However, entry points would be critical. I almost did this once with a double long natural gas ETF because someone had a stupid bid out on it and I could have hedged the other side with the double short. I couldn't get it done though as the broker couldn't find the shares to short. Reply
  • commenter
    SHB
    Mar 31 05:05 PM
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    Does this mean shorting each would have resulted in a net gain (net of interest for all except last two)? Reply
  • commenter
    SJC
    Mar 31 04:48 PM
    ProShares Ultra and UltraShort Sector ETFs: Does 2 = 2? [view article]
    Nice article. Interesting take on ETF and the short side insurance uses. Its hard to draw specific conclusions though since the opposite funds have huge differences in market cap and the qualities of swaps they may hold. Very rarely are you going to have the exact perfect swap between a long a short position on these ETF's. In regard to insurance popularity, you saw this during the Bear Stearns collapse, volume interest in ultra short financial SKF, was became the most actively traded instrument for a brief period of time. Reply
  • commenter
    pdsro
    Feb 13 04:07 PM
    The Case Against Leveraged ETFs [view article]
    About the constant leverage trap, I don't get it why you have to buy high and sell low. Don't know how is formed the table. And how if the index increases in 1% the leverage ratio is 1.98. What formulas was used for get that number?
    Also, if the ultra have the constant leveraged trap, did the short ETF's have it?     Reply
  • commenter
    pdsro
    Feb 01 12:10 PM
    Leveraged ETFs: A Value Destruction Trap? [view article]
    Tristan, im very thankful about your article. But im wondering how the leverage etf work by using this derivatives. Excatly how they can double the index using a future contract or a swap agreement? Reply
Loading...
Symbols:
Authors:
Quick Links: