so much mis-information here I don't know where to start... First thing is first - these are ETFs not stocks. Exchange Traded Funds are simply Mutual Funds with intra-day liquidity. They are not stocks. They are DAILY LEVERAGE / DAILY EXPOSURE ETFs - not monthly, weekly, or any other time frame than a 6.5 hour NYSE trading session. The goal of SKF is to return -200% of it's benchmark index for the given 6.5 hour trading session. Tracking and resistance: Any resistance levels or trends that you see in an INDEX ETF is based on the index that the ETF tracks, not the ETF. These ETFs do not have a mind of their own - they simply provide a given return on a benchmark index for a given time period, SKF provides -200% of the Dow Jones US Financials Index - index goes up, SKF goes down, index goes down, SKF goes up - simple concept. Resistance needs to be looked at in two ways, intra-day (within a 6.5 hour trading session) and longer than 6.5 hours. SKF tracks well - so it's not SKF that hits resistance it's the index it tracks and the underlying securities in the optimized basket. There is no such thing as resistance in an Index Based ETF - the ETF simply mirrors the resistance in the basket of stocks it owns or shorts. Exposure - these things rebalance daily. They do actually go out to the bank and borrow money, post collateral, get swap exposure, buy/sell futures & options, take care of gains/losses and MTM, etc. all on a daily basis. For every $1 you buy into SKF, Proshares goes out and shorts $2 of the index. You and I in the Secondary Market see one side of the coin - in the Primary Market there are Creations and Redemptions to the Fund that require the Portfolio's exposure to be rebalanced on a daily basis. There are a few things about Leveraged Index ETFs that make them different from other ETFs, first there is price decay due to compounding. Take a look at the attached spreadsheet and see what a sideways market does to these things. Next, to pay for expenses and costs and maintain good tracking (meaning that the ETF actually returns what it is supposed to) the Fund's Asset Manager often uses options to generate extra income. Sometimes this can cause the ETF to underperform in downward turns - meaning the ETF may not always lose or drop as quickly as you might think it would. Third is the fact that the Secondary Market is controlled by Market Makers and Specialists rather than the ETF itself. Often times the ETFs can trade at a premium or discount to the underlying value due to demand, ETF holdings, volume, etc. There is more to explian but it's late and I have no idea where to go next. Please do your homework before you invest in these things. They are daily ETFs and meant to be held on a daily or intra-day basis only. The implied holding time in FAS/FAZ is well under a day - not sure if Pro publishes that info on their website but they should. Today (4/1) FAZ was held for an average of .35 days or about 2 hours and 17 minutes of the trading day. Enough for now - good luck trading!!! Recent Volume/implied holdings: http://www.direxionshares.com/Recent-Volume.xls
Man I am glad I got out on the small bounce that was had. I hope everyone else was able to as well. My new question is, how low will this keep going. I am currently shorting and doing great, but what if the the market moves up another, say, 10%. Will SKF drop down to $55? Will it gradually come back up to where it use to be, or will it forever stay at these lows until another financial catastrophe happens?
Thanks for the spread sheet. Any comments about shorting FAZ & FAS in equal dollar amount to capture the decline? is there a name for this phenomenum? Like Reverse Compounding from Deviation fro tme Mean, or something?
bought some skf on the gap down this morning at 41.11, gonna ride this one as it has huge potential upside. stop below this mornings low...