SQQQ does not always inversely track 3x the QQQ I forget the term/ exact explanation why this happens. ps it has to do with decay.
Check this out... Warning: Do NOT hold the TQQQ Nasdaq ETF for the Long-Term Let us be clear, we are discussing the largest casino on the planet earth right now. The 3x Levered, ProShares UltraPro QQQ should come with a surgeon general’s public warning. All one has to do is look at the average trading volume – nearly $5.5B a day for this ETF. It makes the Wynn casino empire’s annual revenues of $6.6B look like child’s play. We are talking about a borderline scam here? It’s a mathematical fact that this beast is NOT long for this world. Sustainability is the question. It’s a high stakes game of musical chairs, DON’T get caught holding the bag. TQQQ Total Assets The TQQQ ETF has lost nearly -35% since the Nasdaq’s September 2nd perch, yet the fund’s total assets have only decreased -16.1% in the same period. This difference is because the TQQQ has seen net-inflows throughout the month of September, the idiots have been buying the dips on this slot-machine with BOTH hands. TQQQ: “ProShares UltraPro QQQ is an exchange-traded fund incorporated in the USA. The Fund seeks investment results which correspond to three times (300%) the daily performance of the NASDAQ-100 Index.” The popular TQQQ ETF is commonly referred to as a 3x levered version of the Nasdaq. Let’s see how this has played out in action… Returns: QQQ Nasdaq ETF vs. TQQQ UltraPro 3x Nasdaq ETF % Return Today (9/24) QQQ: +0.5% TQQQ: +1.5% Makes sense… % Return Past Month QQQ: -6.4% TQQQ: -20.5% Little more than 3x, but close enough… % Return Since 2010 QQQ: +520.7% TQQQ: +6,931.6% Wait… what? % Return Since the February 2020 Top QQQ: +11.3% TQQQ: -5.1% Wait… what??? “The scary part of TQQQ is a 10-year chart gives off the impression that a long-term investment is safe.” What’s Going on? We must think about the math. If an investment starts at $100 and loses -5%, you are at $95. To get back to $100, you need appreciation of +5.26%. However, if that investment is 3x leveraged, you lose -15%, and instead are at $85. To get back to $100 in this scenario, you now need appreciation of +17.6%. Notice that the 17.6% needed is greater than 5.26% x 3. Now, let’s take is up a notch… Scenario A: Stock XYZ is a non-leveraged stock that falls -33%. The stock needs a +49.25% appreciation to get back to even. $100 would have gone to $67 and a after a +49.25% rally, $67 becomes $100 again. Scenario A (but 3x leveraged): Stock 3XYZ is a 3x levered version of the same stock. When stock XYZ falls -33%, stock 3XYZ falls -99%. This stock needs +9900% appreciation to get back to even! $100 would have gone to $1 and after a +147.75% (3 x 49.25%) rally, $1 becomes just $2.47! “The Nasdaq 100 Index has NOT seen a -33% drawdown since TQQQ was created in 2010. Once it does, TQQQ’s prior high is likely to NEVER be reached again.” DANGER: TQQQ UltraPro Nasdaq ETF ANY financial product that is levered 3x is NOT meant to be held for the long-term. The 10,693% rally in the 3x levered TQQQ Nasdaq ETF from 2010 to the recent peak may NEVER be replicated. The largest drawdown the TQQQ 3x Nasdaq ETF has EVER suffered was -73% from February to March 2020. Although, the -73% TQQQ drawdown was painful, a recovery to new highs was attainable. However, if the Nasdaq had fallen just a few more percentage points and the TQQQ drawdown went past -90%, a recovery back to the highs would have been nearly impossible. The Nasdaq 100 Index has NOT seen a -33% drawdown since TQQQ was created in 2010. Once it does, TQQQ’s prior high is likely to NEVER be reached again. Long-term Safety Façade TQQQ looks great on a 10-year chart, but there is no such thing as a free-lunch in finance. TQQQ’s +6,410.9% outperformance over the Nasdaq 100 since the ETF’s inception in 2010 will not be repeated for a very long time, if ever. This was only possible because since the TQQQ ETF was created, the Nasdaq has not seen over a -33% drawdown… yet. Keep in mind, the Nasdaq fell -76% from the Dot-Com bubble’s peak to trough. If this were to happen today, the TQQQ would be a penny stock and the 8 billion dollars invested in the fund would be looking around, scratching its head, wondering what just happened. Unfortunately, the probability is high that inexperienced retail investors lose over -90% of their investment in TQQQ and do not realize they may never get back to an even P/L, regardless of what the Nasdaq 100 Index itself does. Bottom line: PLEASE do NOT hold the TQQQ for the long-term. If we see anything near -35% drawdown in the Nasdaq, new highs in TQQQ are nearly impossible, the math proves all 3x leveraged ETFs must be traded NOT owned. The scary part of TQQQ is a 10-year chart gives off the impression that a long-term investment is safe… https://www.thebeartrapsreport.com/blog/
As long as you're day trading it like you mentioned it's fine. Also we're discussing using it as an intra-day short vehicle, when QQQ is hard to borrow.
I'm looking for bounces mainly in SQQQ TZA if market drops, or breakouts in SPXL TNA if market goes up, for daytrading. The leveraged ETFs are very risky, best for very experienced daytraders imho
welcome. im not going to comment on your specific strategy, but unless you are well versed on 3x ETFs I would not recommend trading them especially if you are holding overnight. Best bet would be to contact your broker not sure why the Qs wouldnt be available. best of luck
wow! thanks for sharing Arnie. to be honest I didnt read all of it :O) but if someone plans on trading them they better be reading as much as they can.
yeah it was sad, when id hear people say they were trading them because "if the market is down it should be up" with no idea of how its even calculated... that tvix was a real roller coaster tho not gonna front i can see why people were so excited to trade it
I've been holding TQQQ & UPRO since around the Greek debt crisis. I've done pretty well. Since it began trading in 2/11/2010 TQQQ has gone from $1.86 split adjusted to $131.08 on 9/28/2020 so it is up a cool 70.47X or 6947%. I doubt any stock is up 70X since 2010. UPRO is up 23.2X since it started trading on 6/26/2009. The most amazing performance is FNGU -- it went from $23 to $255 in 24 weeks (3/18/20 - 9/2/20).