Discussion in 'ETFs' started by Port1385, Nov 14, 2008.
Try e-minis instead. They may blow up your account but at least the security (the e-mini) itself won't blow up. IMHO, these 3x leveraged ETFs are ticking time bombs.
I guess they're not *quite* the same, but e-minis do have the 60/40 tax treatment that the ETFs don't.
emini is already 10X leverage.
3x leverage im there wooooo
Why would the ETF blow up?
The e-mini is NOT leveraged x10
When you place a BUY order as an example at Fridays settlement price of 861.50 and you set a STOP Loss exit @ 860.00 there is ZERO leverage involved. When you trade ES at a certain price and exit at a certain price you are trading price MOVEMENT only. There is ZERO leverage involved.
Grant it, the full SP500 will have a much higher notional value but as a e-mini trader the notional value is meaningless because you as a trader are only concerned with your risk from point "A" to point"B" (point "C" if you have a certain profit objective, but in the midst of the battle we usually improvise on the profit objective relative to price action). Your risk is within the amount of cars traded and the distance to your "LUNCH" point. You are concerned about how well your margin per car is either working for you or against you. You are not concerned one single bit about the notional value of the underlying instrument.
Some will argue and say i am all wet because they THINK futures are scary and the very thought of futures makes them a nervous wreck.
When i or anyone else that trades intraday and watch price travel from level to level do you think we give a rats ass about the notional value? Stock traders, unless in a margin account do not think about leverage because there is none. That is so "YESTERDAYS" game. Nothing against stock traders just trying to emphasize the myth out there about leverage when trading futures.
A stock trader buys a stock and puts up 100% of the stocks price and is concerned about price going from point "A" to point "B" correct? A futures trader BUYS or SELLS a certain amount of cars and puts up $500 margin for each car. The futures trader is also only concerned about price from "A" to "B".
I mean if you go to a race you want to drive a fast car not a slug. Throw away the myth about leverage and come join a faster game. The game is the same, the risks are the same relative to the money you put in the game.
Bare bones futures trading is no nonsense ways to make a closet full of retirement cash and safe as dating a preachers daughter.
I agree bighog a trader can't crap themselves every time they take a 1 lot. What a mess that'd be eh, maybe a funny commercial though:
"Is this you crapping yourself every time you take a 1 lot? Well clean yourself up and send us your money because here at A** Managed Futures we promise that we won't crap every time we trade your 1 lot.
On the other hand liquidity's always a big deal.
Wont these leveraged ETFs contribute to higher volatility assuming the managers have to buy or sell the underlying?
There are also SSFs on leveraged ETFs:
SSO is Ultra S&P500 ProShares (200% S&P500)
SSO SSF listed on OneChicago is 1000 SSO (margin is 20%), so you get 10:1 leverage (but bid/ask is bad).
If they will list SSF on triple leverage ETFs, it will be 15:1 leverage.
Separate names with a comma.