Proshares Ultrashort - Free leverage???

Discussion in 'Professional Trading' started by AndrewL, Jan 3, 2009.

  1. AndrewL


    I've been trading SPY for awhile now with some success. I like the liquidity but don't like the low beta. Some of the stocks I trade such as FSLR move about 3 times as much as the SPY.
    I was wondering if it was possible to trade an ultrashort index which is indexed to twice the inverse movement of the market simply for the added leverage. Can you short an ultrashort index also? Are there any with good liquidity of at least a few hundred thousand shares daily?
  2. Sso. Short or long
  3. Sure. Check out SSO, UWM, QLD, DDM, etc.

    They are leveraged etfs called Ultra ProShares.

    There are also "short" Ultra Proshares such as SDS, TWM, QID, DXD, etc. (by buying the SDS you are essentially short the SP 500)

    They attempt to provide 2.5 X the movement of the index represented. However, I'm not sure that any leverage provided is "free".
  4. I'm sorry 2X the daily movement, not 2.5X as I stated above.
  5. it seems odd to talk about the S&P index having a "low beta" when beta is (usually) a measure of correlation to the S&P
  6. AndrewL


    well it's a low beta relative to what a trader is likely to be involved with. I don't know many traders who trade only Johnson and Johnson or Phillip Morris or anything with a lower beta than SP for that matter. Being the baseline doesn't change that. The average stock in the Russel 5000 for example has a much higher beta. Obviously the 500 biggest companies will be among the least volatile stocks in the market. The only reason I'm involved with SPY is because of the lack of "noise" in the price movements when it comes to indexes. Every price movement has meaning unless individual stocks which have a lot of fluke movements caused by temporarily imbalances. Normally I wouldn't bother with something so low beta.
  7. kowboy


  8. AndrewL


    Great article kowboy. I definietly need to do a lot more research before trading one of these ultrashort indexes.