Right, the point is it's not simply a leveraged delta position as you would normally have if you leveraged 2 or 3xs. It's also a position on volatility. That's why people say to be careful, since you think you are only exposed to the risk of leverage, though in reality you are exposed to additional risk. That's neither good nor bad - as with everything it depends on context.
Right, if something is designed mathematically to go to zero, such as these 2x and 3x ETF's, and the issuer must do reverse splits to keep them active, the risk is pretty obvious... however, what is obvious to some, may not be to everyone....thus the disclaimers from the issuers. Don
I agree - I trade 200% leveraged Russell 2000 and S&P500 ProShares ETF's with 1 to 3 day holds and it works very good.
Volatility is not against against you. Market: +10%, +10% 2x Leveraged: +20%, +20% net return market: +21% 2x leveraged: +44% 44 > 21 x 2 So volatility can be with or against you
Just a math question for you smart guys... start with $100. Add 10%. then take away 10% from that sum. Repeat a few times... then do it with 2x and 3x. Seriously, show me some answers..... (not a trick or anything, just making sure you guys get my point. Up 10 and down 10 is not excess volatility, just sample movements). Don
May have gotten tied up while reading before posting. But, yes, even flat volatility can cause a fall, so excess can certainly cause more downside. Don
No, If the volatility continues in the same direction the return is greater. Market: +10%, +10% 2x Leveraged: +20%, +20% net return market: +21% 2x leveraged: +44% The market was up a total of 21 percent but the ETF was up 44 percent which MORE than double the market. It is similar if the market continues down: Market: -10%, -10% 2x Leveraged: -20%, -20% Market total loss: -%19 2x Leverage Total loss: -36% A loss of 36 percent is LESS than double of nineteen percent.