squark62

Understanding Triple Leveraged ETFs

neutral (nearly so anyway) performance is one strategy i use with my model, going 50%-50% in both is not neutral with these ETFs. the real neutral point is constantly moving. the model finds the optimum pair weighting balance and from there i keep track of where and how fast neutral is moving. using this set of information i implement another strategy and amplify the weight of the ETF that is gaining and attenuate the other weighting. when conditions in the model change, i re-balance the other way. i would not be able to do this if i didn't know where neutral was, which way it's moving and how fast. when i'm not sure, i re-weight to neutral for a while. typical re-balancing is done by adding shares, not selling. if you look at a chart of the performance, the contributions of SDS (short) and SSO (long) looks like a motor commutator signal or a superimposed sine-cosine wave pattern. sounds very complicated but implementation of the technique is very easy and effective. that's what counts.

-cheers


On Apr 08 03:48 PM Ron Rowland wrote:

> "...pairing a long & short position that track the same index
> is a prime case..."
>
> Wouldn't it be easier and cheaper to sit in cash than do what you
> are suggesting? Or take a smaller position of just one if you are
> equally weighting the two?

Understanding Triple Leveraged ETFs

FAZ & FAS are extremely broken levered ETFs relative to ProShares index trackers such as SDS & SSO. arbitrage is attainable with these instruments & w/o shorting or trading options. the good thing about these ETFs is they can be traded in retirement accounts. the concept of re-balancing on a daily basis is hideous, too expensive. there are methods to attain delta neutral performance, high beta performance and in between using a concept from the engineering world that requires much less re-balancing and offers greater returns. pairing a long & short position that track the same index is a prime case for using methods in classical mechanics to optimize weights and when to re-balance. i maintain a service for individual investors doing just this.


On Apr 08 01:51 PM Drew Arnold wrote:

> If they both lose money, why not short both of them and collect some
> arbitrage profits?