Luck-o-the-Irish

Why You Shouldn't Hold Leveraged ETFs Long-Term

I have to agree with Marc here. This topic has been beaten over and over again. To me it feels that this is more a thread to start getting a resume of "being published." I would wager that there are at least 25, nay, 50, articles saying this exact thing. Some do bring new ideas or new strategies. Unfortunately, you are just stating the known. The effort is good, but next time I would recommend doing some research into that which has already been published, and only write an article as such if you have new information or a new twist to add.

Direxion to Reverse Split 3x Financial ETFs After Steep Fall in Price

fractional shares are paid in cash

Direxion to Reverse Split 3x Financial ETFs After Steep Fall in Price

Trench
-You obviously show no understanding of the mechanics of the funds. They do what they were designed to do. If you don't understand them, then don't use them. But if you are going to make an accussation such as that, then at least back them with some facts. I have outlined MANY of arguments surrounding leveraged ETFs on thestreet.com, and several here. I suggest you add something to the conversation that can be pondered or debated.

FAS and FAZ: A Short-Seller's Dream?

Mike,
We've been able to borrow. BGU, BGZ, FAS, FAZ, MWJ, MWN, TNA, TZA, ERX, ERY, EDC, EDZ, TMF, and TMV.


On Jun 13 03:56 PM mike78 wrote:

> I've tried to execute a version of this trade, but could not borrow
> any of the 3x levered ETFs apart from ERX (energy equities, which
> hasn't been a great one to short given the steady climb in oil and
> equity prices). Has anything been able to obtain the borrow on any
> other of the 3x ETFs?

FAS and FAZ: A Short-Seller's Dream?

It is NOT an urban myth/legend as we do it all the time. Simply shorting both sides without some type of protective hedge is really pushing the envelope though. The point made about a trend is correct, and one to be careful when trying to execute such a trade. What if you shorting FAS and FAZ back on March 9th in equal amounts? Your short on FAZ would be close to zero, but your short position in FAS would be almost 4 times GREATER than where you initiated it. I don't think many have the capital to withstand such a loss. Also, you have the risk of a call in. What if one side gets called in after a short trend. Logically, you'd have to close both positions or you would open yourself up to an extreme bear or bull position without a hedge. So, if you were forced to close, then you could be forced to close at a big loss not by your choosing.
The theory has merit, but the recommended execution here is not done in a risk managed fashion and the theory is flawed in its simplicity. There are no risks spelled out in this article, and that is truly ashame. It can be done, but needs to be done with additional hedging or you will go broke in a trending market that shows little volatility. Just look at FAS-FAZ from March 9th through yesterday.

3x ETFs Are Wealth Destroyers

The inverse are total return swaps. According to Direxion, the long 3x, actually invest 80% of the share into the underlying common/index, then leverage the remaining 20%.

Ok...we all know this already. Nothing new here.
How about a trading idea?

Understanding Levered ETFs and Geometric Returns

The firms have the ability to "cash out" the leveraged ETFs or remove the leverage when an index declines by a large percentage in a single day, thus preventing them from going to zero.


On Jan 05 07:27 PM igggy wrote:

> I would like to know what happens with a 3x ETF when the underlying
> index goes 33.3% against it. Does the ETF just go to zero and die?
> Obviously, the same question applied to 2x ETFs if the index goes
> 50% the other way. I know it's a far fetched scenario but I wonder.

Understanding Triple Leveraged ETFs

Shares are difficult to borrow, but not impossible. We do it on a daily basis. Furthermore, you can use synthetic shorts. Also, just shorting both sides can be done, but in a sharp trend...hmmm...let's see, like late Feb or Mid March, you better have a heck of a lot of capital, because for how the compounding can help you over the long run, it can crush you over the short run. Just look at the latest run by FAS versus the drop in FAZ. Being short both, just during the downtrend or uptrend, would have resulted in HUGE losses, so unless you had the capital and/or margin room, a person may not have been able to wait for a reversal. If you had gone short both right around SPY 670, you'd still be waiting for that reversal and well underwater. Squark62 has a solid concept. Our firm's concept is a bit different, and done in more of an arbitrage format, and yes, we short these things and hold, but it is a concept more formulated, and protected, than just flat out shorting both sides. If you are wishing for the inventory to short both sides, and that is all you are doing...be careful what ou wish for and have a LOT of capital for your position.

Understanding Levered ETFs and Geometric Returns

Squark62 - maybe we should chat. Shoot me an email with some contact info at tcolllins@claruspartne...


On Jan 04 10:43 PM squark62 wrote:

> like Luck-of-the-Irish, i too have benefited from quantitatively
> pairing short and long etfs to form a delta neutral hedge and profit
> during sudden down-turns in the market. does hamiltonian ring a bell?

Understanding Levered ETFs and Geometric Returns

There is a way to profit from this compounding and "inefficiency." We've been doing it for over the last year.

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