TQQQs. They give you 3x leverage. Sure, there is a little drag on them, but I've tested and its really not that much. Now, people talk about how TQQQs will eventually go to something close to zero when the Naz collapses. So you'd be crazy to keep your money in TQQQs long term they say. But then I started thinking - I know the fix for that! So here is what you do. You put [90%] of your money in TQQQs. That gives you an equivalent invested in the QQQs or right around 270%. Massive. Of course, without more, your investment would eventually get obliterated when a real recession/depression hits and Naz dives 50% or more. But that is "without more". So you are going to do more! What you are going to do is take that [10%] left over amount in your account and buy tons and tons of puts (either on the TQQQ or the QQQs). Enough to cover your [270%] investment, and maybe then some! Strike price can vary depending how much risk you are looking to offset and how much less long-term reward you are happy with. You've now got a MASSIVE [270%] investment equivalent, and greatly limited downside because of your puts. The [90%] in the TQQQs and the [10%] in the TQQQ/QQQ puts will be tweaked to give you the downside coverage you want (I just made up those 90/10 numbers as a starting discussion point) - maybe 80/20 is better, for example (in which case you'd still have a ~240% QQQ equivalent LOL). This is pure money in the bank. You are welcome ETers...
Did you backtest this ? What is the overall drawdown then in your backtests with the Long Puts here on TQQQ?
I don't know how to backtest given I don't have options data free so far as I know. But I am in the process of coming up with a simulation to see what the exact positions I construct do given if QQQ drops by various amounts - i.e. to forward test it LOL.
There's always an achilles heel. There is no free lunch.* Based on your description, you'll lose if QQQ doesn't go up but doesn't crash enough for your puts to be profitable either. You could even lose on both. You're betting that either QQQs go up OR they crash but you haven't covered your in-between area. Again, no free lunch. If that's your thesis and you're willing to risk capital on it, then fine, but your enthusiasm makes it look like you think it's guaranteed. -- *Unless you're doing pure arbitrage, but in that case the "achilles heel" is the cost to compete with everyone else who is doing pure arb.
Why you don't put in the part about maxing out your credit cards, borrowing from everyone that will talk to you, mortgage the house and put that money to work. Why you holdin out the dope about Icing on the Kake? You'll make a fortune overnite! Go On Witcha Badd Sef, Mang!! The world is your oyster.
The devil is in the details of puts/hedging part. Like StatisticalTrader said, the market could easily land in no man's land where your puts aren't profitable but the QQQ is down 20% (so you're actually down 50-60%). You'd need to ladder the puts (not just buy way OTM ones) and decide when to buy them back if they become profitalbe..and how to buy more to keep a hedge. There's also things like "black swan hedging" (back ratio spreads) where you sell some puts to "pay for" the ones you buy...but typically that's way out of the money and you still have to decide when to cash out and re-hedge. If you backtest and figure out a robust solution, send me a message...but I wouldn't go public with it.
I think the thing you're missing is time decay. If the markets decided to move sideways for awhile, your puts would expire worthless, and your leveraged ETFs would lose value.