Someone help me out here. Why is SDS vol/liq so much greater in magnitude (~10X) than SSO? If supply and demand makes any sense, and SSO has so little demand, shouldn't the chart point the other direction? Granted this is a chart of the underlying cash index, but still...
Volume in the SDS, the leveraged short-bias fund, is larger probably because traders see it as a more attractive vehicle to establishing a short position. The SSO, the leveraged long-biased fund, may be having trouble competing with the SPDR's, the unleveraged long-biased fund. Reardless of its trading volume, the value of the SSO still has to remain "in line" with the other funds, otherwise there would be a free-money arbitrage opportunity. More important, if you really want leverage, trade the S&P futures instead.
ok, that make some sense... -but- "The SSO, the leveraged long-biased fund, may be having trouble competing with the SPDR's, the unleveraged long-biased fund." By that argument , shouldn't there be a roughly equal number of shorts who don't want 2X leverage so they just directly short SPDRs, thus balancing out any differences due to this competition factor? I've heard it's difficult to short SPY directly, so maybe that would be a reason, although I haven't confirmed that personally. Anyways, I'm not interested about the leverage power aspect, just wondering why the discrepancy in volumes and relation to supply/demand.
My understanding is that the sds is used primarily as a hedge vehicle on existing portfolios. So there are clear benefits to the sds........as where the sso does not really offer anything unique .