I'm thinking I may want to trade QLD instead of SPY. It's cheaper and has much more movement, even more than SSO. I may start a new position with QLD tomorrow.
why not instead short 200 shares of QID? its the same position as the one you just took, but now tracking errors go in your favor instead of against you
Tell me more about this. Is it enough to overcome paying interest on the short position? Another thing to consider is that, as the position moves against me, I want to be able to aquire more shares at a cheaper price. If I'm short QID, as QLD goes down, QID is going to be going up, and I'm going to be shorting more at higher prices. Even though it's only in the 30s right now, something feels strange about that.
well, shorting QID and longing QLD is the same position, minus tracking errors. so shorting QID at higher prices, is the same as longing QLD at lower prices. Take a look at a 5 year chart on any of the 3x funds, short or long. they all have one thing in common, they head to zero. This is due to tracking errors of trying to mimic the 3x performance. I've shorted lots of ultra shorts (QID, ZSL, FAZ) all during times like last august, you short the ultrashort after market is done tanking. then about 2-3 months later you cover. the cost to borrow is around 6% a year I think so 1-2% cost to do this. I do believe this 1-2% makes up for being on the right side of the tracking errors.
how about this, short 100 shares of qid for every 100 shares you long qld, and see which does better. the goal is to test what effects the position more, tracking errors or borrowing costs. the overall difference won't be more then a 1% a month so its not like you are taking a huge risk in doing that. EDIT: sorry that was actually the wrong way to set up the trade, short $10,000 worth of QID for every $10,000 of QLD you go long..or whatever dollar value you want to use.