Show me one market, just one that's come even close to what you're hypothesizing. Otherwise, give it a rest already, you lost the argument.
You said it was "not possible" and "impossible" for FAZ to trade above 380 again... do you understand the difference between that and unlikely? Or did you fail 7th grade English as well as 7th grade math? First you said it was "not possible" because "all trading in financials would stop long before the index came close to zero." WRONG. Then you said it was "impossible" because the index would first have to "reset" above 800. WRONG AGAIN. Then you said "retracements, no matter how small" would "completely wreck" my argument. WRONG YET AGAIN. Go ahead and stomp your little feet but it just makes you look like a whiny brat on top of being an ignoramus.
Your idea of "possible" requires a mathematical construct with no basis in reality. Show us one market that even comes close to the same kind of downtrend as you've hypothesized. Until then it's nothing more than mental masturbation.
"Possible" means what it does... there's no "my idea" of what it means or "your idea." You're just a spoiled little brat who can't admit when he's wrong. The original debate was simple... whether or not it's possible for FAZ to trade above 380 and your arguments all showed you're totally clueless. To review: first you said it was "not possible" because "all trading in financials would stop long before the index came close to zero." WRONG. Then you said it was "impossible" because the index would first have to "reset" above 800. WRONG AGAIN. Then you said "retracements, no matter how small" would "completely wreck" my argument. WRONG YET AGAIN. As for your latest attempt to save face, what cosmic law says markets can only go down in the future as far as they have in the recent past? Tell us who predicted that C, BAC, FNM, FRE, AIG, LEH, etc., etc. would fall as far and as fast as they did. Are you really so naive to think it's not possible we could have another leg down that's even more severe? YOU'RE WRONG HERE AGAIN. Please... for your own good... redo 7th grade math and English and get professional help about your entitlement delusion... now I see why you think deadbeats were entrapped.
I'm quite certain that one of us (you) will be proven wrong by December while the other will be proven correct. It's an index, not a company, twit...
LOL Is this the fifth time now that you've tried to change what the debate is about because you've been proven wrong all the other times? I've lost track. Show me where I wrote FAZ would trade above 380 by December.
Tony, Sorry to not reply sooner - I stopped paying attention to the thread when the name calling started. I guess I like to say NAV because it reinforces that these are mutual funds with intra-day liquidity rather than stocks. The goal would be to short the same dollar amount, say $10k per side so at NAV/Price of $20 that would be 500shs and at NAV of $6 you would short 1667 shares. Shorting an even amount of $ or exposure is the key - not an even amount of shares on each side. NAV is the opening/starting price so I use that as a point of reference. They will never actually hit $0 - unless you start rounding and round down under $0.005. The NAVs may get VERY small but look at UYG and SKF - FAS/FAZ are 3x so more leverage and more price decay, but still the markets will usually keep them at something reasonable. There is no resetting price. The ETFs launched at an NAV of $60 and they go where the markets take them. The Asset Manager can decide to do a reverse split - which has been discussed, but that's about it. A reverse split would simply raise the NAV and reduce your share count, essentially raising the price but maintaining your market exposure and capital invested. To answer the rest of the group, I would look at SKF as a rule of thumb. A 3x ETF has the potential to go much higher and much lower and decay much faster than a 2x ETF. A price of $2,000/share is **POSSIBLE** but not probable. The way that you would see it is with small moves - a 1% index move for a 3% share price increase, over time, compounded, etc. would cause a huge jump over a period of time, however daily funds, daily compounding and daily market action/movements will over time almost certanly cause price decay rather than the opposite. I wish there was a little less name calling around here
I understand what you are saying about equally leveraging yourself into two corresponding short/long ETFs, but I don't understand to what end? Would not a loss in the short ETF simply mirror an equal gain in the long ETF? Or is there a discrepancy that you guys are looking to bank in on? I don't fully understand the math and extensive discussion here if you are only looking to gain a few %.
Because these are daily exposure ETFs there is price decay by their nature - in sideways markets or volitile markets the price will degrade or decay (drop) while the ETF continues to produce accurate DAILY performance. The theory is that knowing the price will fall from $X to something lower over time (both long and short) by shorting the pair, your profits come from the price decay not the up/down daily performance of a bull/bear pair.
I see what you are saying but isn't the salient NAV a way of insuring against this? People will know the underlying value of the ETF, and so long as volume is moderate, will it not be maintained? I don't understand how price decay can occur so long as the NAV is public.