Discussion in 'ETFs' started by stock777, Aug 4, 2009.
damn. what a disaster
The market is so unhinged it is fking amazing!
This is why people like S2007S clearly don't TRADE for a living... If they did, they wouldn't be claiming to average down on one ETF after another and "cut and pasting" one bearish article on the economy, after another.
It's a big mistake to trade off of what you "believe" the fundamentals of the economy are. The stock market is a much different "animal" and more often than not has NOTHING to do with what is going on in the life of Joe Blow.
The SRS is a good example of this.
Who would "own" a leveraged ETF???
Have you ever read the prospectus for these things?
"The ETFs are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk, consequences of seeking daily leveraged investment results and intend to actively monitor and manage their investments. The Funds are not designed to track the underlying index over a longer period of time."
"The Funds are exchange traded funds that seek daily leveraged investment results. The Funds are intended to be used as short-term trading vehicles. The Funds are not intended to be used by, and are not appropriate for, investors who do not intend to actively monitor and manage their portfolios. The Funds are very different from most exchange traded Funds. The pursuit of daily leveraged investment goals means that the Funds are riskier than alternatives which do not use leverage."
"First, all of the Funds pursue daily
leveraged investment goals, which means that the Funds are riskier than alternatives that do not use leverage because the Funds magnify the
performance of the benchmark on an investment. Second, each of the Bear Funds pursues investment goals which are inverse to the performance of its benchmark, a result opposite of most exchange-traded funds. Third, each Fund offered in this Prospectus seeks daily leveraged investment results. The pursuit of daily leveraged investment goals means that the return of a Fund for a period longer than a full trading day will be the product of the series of daily leveraged returns for each trading day during the relevant period. As a consequence, especially in periods of market volatility, the path of the benchmark during the longer period may be at least as important to the Fundâs return for the longer period as the cumulative return of the benchmark for the relevant longer period."
Slippage, anyone? As said above, you don't "own" or "invest" in leveraged ETFs. Over the long run they only go in one direction... down.
Which is why if you're gonna hold 'em for a while, you should be short, and hope they don't call it in.
Is the slippage accounted for in their option prices?
It must be otherwise there would be some opportunities there.
Why not just short both FAS and FAZ at the same time?
Good question. Remaining solvent doesn't seem like an issue because they should be moving inverse of each other. Your acount shouldn't really lose any value, but will gain value over time as they both trend towards zero.
Cuz it's a slow game, and profits could be wiped out quickly if say, your FAS short gets called in, leaving you with a FAZ short, and financials go up.
Your profits would disappear in a few hrs, or less.
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