SQQQ 22 Years Historical Simulation

Discussion in 'ETFs' started by fiftium, Mar 10, 2021.

  1. fiftium

    fiftium

    As SQQQ was created in 2010, there is no data older than that. I created a simulation using the data of QQQ from 1999. The initial value was 1 million.

    The simulation does not consider the fund management fee or the inaccurate tracking of the index. But it can give the insight what it might look during 2000-2003

    This is to test the shorting strategy, whether the account had been wiped out due to margin call

    Here is the Video Link if you are interested.
    SQQQ2.png
     
    Last edited: Mar 10, 2021
    userque and murray t turtle like this.
  2. Overnight

    Overnight

    So...Indexes only go up over time. Is that what you are saying? I mean, I can't wait to see it plotted past 2003, which by the way, according to my calendar, has already happened. Wonder what it will do in 2008-2009. I can only guess.
     
    murray t turtle likes this.
  3. fiftium

    fiftium

    This is to test the shorting strategy, whether the account had been wiped out due to margin call
     
  4. fiftium

    fiftium

    Also some people hold it long term because they wish it will bounce back to have a gain. This is different from VXX. When VXX bounced back, it really reached its 3 year old high
     
    Last edited: Mar 10, 2021
  5. manic

    manic

    Shorting SQQQ is my most profitable strategy.
     
  6. I tested this, shorting SQQQ came a bit better than going long TQQQ. Problem is (i) you have to pay the short interest rate, which eats into, or eliminates, any advantage, (ii) you have to worry about short squeezes (although may not be too much of a concern if tons of shares out there), (iii) you have to find the shares to short in the first place, (iv) since its a short, you can theoretically lose an unlimited amount of money, (v) since its a short, the way these things work, every day it goes up, you have more shorted the next day, which means if it goes up again you have more shorted, so in a big, slow bear market every day the stock market goes down and your short goes up you are shorting more and more each day, further compounding your losses, (v) with the short, you always have to worry about the guy you borrowed your shares from deciding to sell his SQQQ shares, meaning you have to buy your shares at his whim - and the most likely place when he will want to sell his SQQQ shares is a market low (thus a SQQQ high), because he had made a killing, meaning you could be forced out of your position after you've suffered huge losses, right when you need to stay in the position to take account of the leverage to try and gain back some of your huge amount of losses as SQQQ has risen a ton on the market way down, and (vi) because you can be forced to buy to cover your SQQQ shorts, you will be forced to recognize any tax gain, and I want to make sure and hold until I die, so no taxes whatsoever. :)

    I think TQQQ is the way to go for all these reasons. You'll still turn small amounts into HUGE amounts over the long run, without all these issues.
     
  7. Great thread btw. Great minds think alike. :)
     
  8. manic

    manic

    TQQQ is still in a drawdown if you invested during the tech bubble. The bottom line is that short SQQQ or long TQQQ requires some sort of market timing or hedging.

    You are right that a long, slow bear market will crush a short SQQQ strategy. However, it will also crush a long TQQQ strategy. Hence the need for some sort of hedge or timing. The time period since the inception of these leveraged funds has been favorable. 2000-2010 would have been brutal.

    Shorting SQQQ is pretty easy since tons of brokers have shares. IBKR has several million and lets you short at 0.4% interest. Fidelity also has millions of shares and lets you short at 0%. (Also, SQQQ cannot be short squeezed like a stock can, if that is what you were implying when you mentioned short squeezes.)

    My strategy is to use options to create a short position. I sell call spreads and buy puts, entering at a net credit.

    Another thing to consider is that TQQQ will really suffer during a sideways market, especially a choppy one. Short SQQQ will do well. For instance, short SQQQ returned about 1% in 2018, while long TQQQ was down 20%.

    But again, both of these strategies require active management. I just don't think the odds favor a long TQQQ position over time. Something to consider short both SQQQ and TQQQ. You can also try going long volatility and short SQQQ. Volatility has a much higher downside beta.
     
    Last edited: May 26, 2021
  9. wmwmw

    wmwmw


    The most you can profit from shorting SQQQ is 100%. While long TQQQ you can get 10000%.So if you short SQQQ from 1999 you make 100%, are you satisfied? Even you long QQQ you can make 700%.
    Shorting SQQQ can also blow up your account. Check out 2000 bear market.look at OP ' chart, SQQQ went up like 600% in 2000, that means you can only short with 16% of your capital or your account would be wiped out. And if you short SQQQ with 16% capital ,you would only make 16% for the past 22 years.
    From OP' chart the risk is not so obvious, because you short from 1999.
    But what if you short SQQQ at 2000 market high? From there SQQQ went up 600% and you are done.
     
    Last edited: May 26, 2021