Levered ETF's--Portfolio Salvation or Damnation?

Discussion in 'ETFs' started by marketsurfer, Dec 23, 2008.

  1. Now look at Ultralong S&P500 vs SPY:

    <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2235267>
    #31     Dec 24, 2008
  2. 666,

    Interesting but why do the double inverse funds correlate to their inedx worse than the double long funds? Vol virtually always moves inversely with equities. It would be expected for the double inverse funds to show some correlation with vol. The S&P will show a negative correlation to vol. That doesn't prove that rising vol causes the S&P to go down.

    The RM author has another piece out today, but he basically just repeats his conclusions from yesterday as though they were fact. He doesn't even seem to get the real reason for these fund's popularity, namely the shorting restrictions. The only way you could short financials was through SKF. I got the impression he was largely just reflecting MM anger over being cut out of some lucrative business.
    #32     Dec 24, 2008
  3. AAA, I can't answer that without "looking under the hood" of the ETFs to see the exact combination of options, futures, swaps, etc. in each one.

    But the good news is, it's not necessary to know "why" if you have a good handle on how they behave. Just like one doesn't have to be a mechanic to drive a car.

    You're right though that correlation and causation are two different things and about the S&P and volatility:

    <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2235424>
    #33     Dec 24, 2008
  4. #34     Jan 4, 2009
  5. #35     Jan 5, 2009
  6. I avoid ETFs that present tax problems - USO and ProShares spring to mind. PowerShares is A-OK though and I've made quite a bit of money over the past few days on DXO :D
    #36     Jan 5, 2009
  7. wow - a lot of mis-information here in this thread from the first post (yahoo article) to the suggestions as to why the pairs don't always track equally.

    All of these things are index based ETFs and most have "optimized baskets" which seek to accuratley track the underlying index - but don't always track perfectly.

    Most often when you see a pair's (bull & bear same index) tracking or intra-day price deviate from where it should be it can contributed to the previous day's close. If one closed at a discount or premium it will usually self correct at the next open - leaving one right off the bat trading up or down from the index because of the correction.

    Look in the funds' prospectus - you will find that the bull & bear pairs are ALWAYS comprised of the same thing, only one is short and one is long so the holdings will be different, though they will still track the same index - at least in my experience.
    #37     Jan 5, 2009
  8. Speaking of misinformation... your "answer" doesn't even come close to explaining differences like these between IYR and the +/- leveraged ETFs but this does:
    <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=2247708>
    #38     Jan 5, 2009
  9. No... your answer doesn't - but as I said before, today is day one here on this board for me and I'm not about to start arguing with you across multiple threads.
    #39     Jan 5, 2009
  10. #40     Jan 5, 2009