Indeed, it is quite annoying that the big houses do not hedge that far out, and I simply don't know why that is. I suppose they don't want to lock up money for such a long time, unlike CL contracts, which have some liquidity years out. Maybe because CL is a physical commodity, where SP is just cash.
Your method sucks. In a market crash it spells disaster. In a bull market it profits much less than holding a 3x ETF. A one million account holds 15 ES contracts. So if spx drop 1000 points, your account lose $750000. In early 2020 SPX drop 1200 points. Your account lose $900000.Your account would be liquidated well before that.The problem is not only this. Even your account did not get liquidated, at that time what makes you believe spx would not drop another 1000 points so you still dare to hold 15 contracts on a $100000 account? Now suppose market goes up every year for 5 years. If each year market goes up 20% , and a 3xETF goes up 50% each year.A 3xETF account calculates as 1.5x1.5x1.5x1.5x1.5x 1 million. While your futures account calculates as 1.2x1.2x1.2x1.2x1.2x 1 million.At the end of 5 years 3xETF account has 7.59 million.Your futures account has 2.49 million. Your futures account does not have decay, but it is 100 times worse than decay.Higher risk lower reward.
From Feb 2020 high to March 2020 low, 3XETF SPXL drop 78%, yet your futures account drop 90%. From Jan 4,2022 to June 17, 2022,SPXL drop 59%, yet your futures account drop 86%. It is funny your futures account is supposed to avoid decay and drop less in a big market decline, but in reality it drop more than a 3XETF account. Now two accounts: 3XETF account at $410000 worth but without risk of an account blow up; Futures account at $140000 worth on 15 contracts ES, the blow up of account looks inevitable. Which one you prefer to hold?
WMWMW do you have 3x in your porfolio as a long term investment? I am worried little bit investing in futures due to the facts you are stating. But I don't understand futures or 3x that well. I like the idea of my account not blowing up and not getting margin call and liquidation. 3x ETF are risky and decaying but If we get big enough drop let say below 2800 I think I am gonna take a risk and I will make maybe 5% of my portfolio 3x sp500.
I don't trade 3XETF, I trade futures which is riskier than 3X ETF. If you want to buy 3XETF, then you are looking for high reward, so you need to tolerate high risk. Decay and market going down both are risks that you need to face. A lot of people say 3XETF is only for short term trading, not for long term holding. But they forget one thing: short term trading itself is a high risk thing,its risk is higher than holding it for long term.Traders who lose money from short term trading, much more than losing money from decay of a 3XETF.100 people who trade 3XETF for short term, only 1 can beat the one who holds it for long term. Futures are definitely not a good long term holding instrument.
Isn't the risk in 3x smaller if I buy it in recession ? I would never ever buy it when sp500 was at 4500 levels.But what is the risk when you buy it at 2800 levels...Let say it goes then to 1500 levels....It should not stay there forever. My 3x would be drop 80% , then I just buy little more buy selling some SPY. I am optimistic person and I don't believe we would have 5 year long recession . It seems that recessions in USA end rather quickly 1-2y max.
Yes, I think betting on a 3Xetf on belief a recession will be less than 5 years is a better option than betting on your trading short term or betting on a futures long term holding.
I had extra cash right when sp500 hit low during covid, I bought sp500 at around 2500 . At that time I didn't think of buying 3x . I would have some $ in 3x. I'll wait a bit to see how it plays out. If I lose 10% of my porfolio because of some 10 year long recession then be it....By that time i'll have some extra $ and by SPXL until we have a recovery .