UPRO: Can One Stomach The Volatility
Summary
- The ProShares UltraPro S&P500 ETF aims to deliver 3x the one-day returns on the S&P 500 Index.
- Levered ETFs like UPRO have positive convexity and volatility decay, causing them to deviate significantly from their underlying indices over time.
- Nimble traders can take advantage of positive convexity and use levered ETFs as swing trading instruments.
- However, investors need to be careful with the timing, as the UPRO can expose investors to very large drawdowns if timed incorrectly.
- Markets are very overbought in the short-term and risk/reward is not positive for UPRO at the moment.
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