sorry to interrupt, but i am super intrigued by this situation. it seems that both of these etfs will eventually hit 0. i know we cant short them, so how can we make money off of these etfs? this seems like a huge opportunity. is there some rule that when the price gets to a certain level they will reset the price???? i went to their site, but did not see anything mentioned.
You're absolutely right, they have a limited lifespan. Take what you can, but don't get greedy. This is one case where pigs will definately get slaughtered.
There has been speculation that FAS may do a reverse split, however nothing has been announced. http://247wallst.com/2009/03/13/would-direxion-financial-bull-3x-consider-reverse-split-fas-faz/ Keep in mind that these ETFs might not ever hit zero, however it is likely that they will approach zero.
No, you're an idiot because you said it was not possible for FAZ to go above 380, which it could do with the index declining to the upper 100s. As far as "reality interfering," the index went to the low 300s on March 6, so it's not out of the question it could return there and go 100+ points lower. Apparently reality can't interfere with your brain. Have you thought of retaking 7th grade math? I think it would really help you.
Your numbers are actually for 31 days, 32 would be 1746.92 and 97.11... but at least you understand this, unlike jprad
Give it a rest already. I've shown that a steady decline using actual returns would have the index breaking below 100 with the FAZ still below 380, 15% below. I didn't post the final index value that would be reached once the FAZ went above 380 for a reason -- to see if you'd take the time to back up any of your bullshit with actual facts. Thanks for proving that you're all talk, opinion and theory. You must be related to stock_trad3r if you think that the index could drop almost 75% below 300 without some sort of market intervention occurring first.
Oh please... you pigheadedly said it was "not possible" for FAZ to trade above 380... you even made up some garbage about the index having to reset. ROTFLMAO!!!! Then, AFTER I and others called you on it you tried to BS your way out of it like you are now. If you could do 7th grade math you'd know that a steady decline of 3% a day for 35 days would take the index to 172.63 and FAZ to 407.26. The "actual returns" you speak of are your lame attempt to keep from looking like an idiot that isn't working. Grow up little boy. Remember this? And this? And this? LOL
You contrived example would, in reality, never happen. You're either disingenuous or a complete fool to try to argue otherwise. Any downtrend, no matter how steady, is going to have retracements along the way. Which is exactly why I suggested using the actual daily returns of each that OCCURRED IN REALITY to walk forward from. It's those retracements, no matter how small, that completely wreck your argument.
Please consider taking a 7th grade math course and changing your user id because you're wrong yet again and you've lost all credibility. For the record, this debate was never about if what happened earlier this year could push FAZ from current levels to over 380... you keep throwing up red herrings in a lame attempt to save face. But that's OK, it's all in black and white in this thread and I'll just deal with your latest "thinking" about retracements. And guess what? You're wrong again! You said that retracements, "no matter how small" completely "wreck" my argument... well how about 10% retracements NOT wrecking it? Starting with the index and FAZ at Friday's closes of 501.31 and 19.95, let's say we have four down days of 5% each followed by a retracement of 10% and that sequence continues... after 64 trading days the index would be 109.26 and FAZ would be 395.74. Change the retracements to 5% and after 37 trading days the index is at 151.4 and FAZ is 423.46. Maybe you should stop digging yourself in deeper here and take that 7th grade math course...