I would like to use leverage but cap my loss at initial investment. For all their faults, I'm interested in leveraged ETFs for this reason. I trade futures and know I could get more predictable results with futures, however your max loss is the notional value of the contract. Technically, if the market gaps below my stop I can loose more than my initial investment. Do levered ETFs have validity in this case or are options a better solution? I'm looking at index related products, ES, SPXL, ES options futures, etc. Thank you
IMHO, this will be a personal decision. I knew one person who only traded leveraged ETFs. I, personally prefer(ed) to use options to obtain leverage and cap my risk. (long options to limit max loss to cost of option)
You'll lose the same amount unless you are in a 3x fund vs a 3x leverage in futures unless the index you're tracking falls by more than 1/3 in a day. You could just as easily buy a deep OTM put to protect against that same as the 3x fund does. Keep in mind leveraged funds return 2x or 3x of the daily return of the underlying. That's a very different thing over more than a day than returning 2x or 3x of the underlying.
%% You may want to look in that, SG?? NOT that futures or leveraged ETFs are ''predictable'', in any sense of the word. SPXL looks plenty liquid,[av volume about 777k/per day] even though volume has been trending down past 7 years/+