*No Risk* - Simply Short UNG, VXX, SDS and every other Constantly Decaying ETF

Discussion in 'ETFs' started by thesniper, Mar 26, 2012.

  1. There are so many ETFs out there that seem to be constantly decaying towards zero. UNG, VXX, SDS come to mind immediately but there are like 20+ others. Why even bother trading when you can just short these ETFs and double your money almost every year.
    I also wonder how the SEC can approve such ETFs that have zero chance of making anyone any money if they hold it more than a couple of days. These are the riskiest "assets" on the planet right now. I also wonder if there are hedge funds out there that exclusively short these funds.
  2. Most are either hard to borrow, or easy to borrow but expensive to do so. You have to also finance the hedge.
    quant1 likes this.
  3. Can't speak much about VXX and SDS but I've been shorting UNG daily greens and especially weekly greens (these are rare) obtaining a massively high winning percent ratio.

    UNG is truly fabulous, I love the reverse splits too.
  4. S2007S


    I agree, these stocks constantly go down because the market constantly goes higher, but you have to be careful, yes its working now for a great short but if these markets were to continuously fall for months at a time you lose greatly. That hasn't happened since 2008 so I guess you can say short away!
  5. True for VXX and SDS, not the case with UNG, UNG tracks natural gas, a commodity in a severe downtrend plus terrible contango headaches, a true falling knife.

  6. I've also wondered about that as well.

    Then I remembered a quote, which was posted awhile back on another thread:

    "Wall Street thrives on transaction based compensation, it's written in the scrolls."

    More ETFs means more volume for the exchanges, and thus more fees. It's a supply/demand issue. If the paperwork is in order and proper disclosures are made in the prospectus, then the rest is up to the trader.

    The issuers of these decaying ETFs will just announce a reverse split if the ETF tanks too hard, and the process will repeat.
  7. They exist because some investors want them. Because...

    1. The underlying asset is difficult to invest in directly.
    2. The underlying asset is easy to invest in, but the minimum notional amount is more than they want, i.e. Nat Gas futures.
    3. The investor is limited to trading equity exchanges only.
  8. Maverick74


    The loan rate on the short kills your edge.
  9. I'm familiar with UNG [and the leveraged ETFs]

    are there any other Non-Leveraged that Decay, like UNG?

  10. Sooooo stupid, don't know where to begin.
    #10     Mar 28, 2012