Ever compared bull/bear triple leveraged ETF's and notice when one goes down it doesn't mirror the other very well?

MichaelZZZ wrote: ↑ Over a short term they mirror each other well. But over time they can be hugely off. As there is decay over time which can be significant, is this what I'm seeing? Maybe I'm weak in geometry....

Take UCO and SCO for example. These ETF's are not meant to be looked at for more than a day. Fundamentals for it mean nothing imo. It's 100% day trade. All 3x ETF's.

MichaelZZZ wrote: ↑As there is decay over time which can be significant, is this what I'm seeing?

It's a known phenomenon. You can find articles on the subject if you google for "leveraged ETF decay" or "volatility decay".

The decay will be the lowest/insignificant if the underlying index is very popular and liquid, e.g. S&P 500. For something more specialized and volatile, e.g. energy stocks, it will be more noticeable. Resource-linked leveraged ETF, as mentioned in the post above, could have the worst decay.

What about shorting both the 3x bull and 3x bear? I'm sure there is a reason, but would you not be able to take advantage of the decay in this sense?

kobe360 wrote: ↑ What about shorting both the 3x bull and 3x bear? I'm sure there is a reason, but would you not be able to take advantage of the decay in this sense?

Lol, good thinking but no, not viable at all. Shorting has its own costs and sometimes is just impossible. For assets with high decay, the costs of shorting will be also higher.

Most importantly, you'd run into the problem of ongoing rebalancing your short positions (otherwise there is extra risk and less reward). Which means the shorting strategy has its own decay due to rebalancing.

Here's a correlation of several of the more popular 3x LEFTs. If you start in the top left corner and scan down to the right at a 45 degree angle, you can see the correlations of each pair. And you are right they don't move 1 for 1, in fact a couple of pairs have a pretty wide spread (SOXL/SOXS, UVXY/SVXY).

The divergence is a result of the daily rebalancing of the fund's leverage and the impact that volatility has on the fund's returns in conjunction with the leverage. In downward, flat, and roller coaster markets volatility is bad news for LEFTs, but in strong bull markets it can result in larger compounded gains. The best example of which would be TQQQ, which since it was created in 2010, has actually returned over 10x the Nasdaq 100's return over the same time period. This is obviously far above 3x. That said, the Nasdaq 100 had one heck of a good run to achieve that and even then in that time period since 2010, TQQQ had three 50% drawn downs (including the current ongoing one) and half a dozen 25-35% draw downs. And even then, most 3x LEFTs don't come close to the performance of TQQQ or even UPRO and in fact more than a couple have blown up and been delisted (meaning you essentially are left with pennies on the dollar).

LEFTs are high risk investments and I don't recommend anyone go near them unless they've truly done their homework. That means thoroughly understanding what they are getting into in terms of how the fund is structured, how it works in relation to the underlying investment, how the price moves, and what the risks are.

100% day trade? Day trading is about the best way to lose money imaginable. You are trading with a clock ticking all the time, forced to sell at the end of the day whether you should or not. Its pure insanity and only used by people unfamiliar with the market. Or just a little simple in the head. Waiting out temperamental dips in the market is the cornerstone of profit and the elimination of loss.

Have you ever looked at long term charts for SOXL, FNGU, FAS, and many others tracking stable industries? They're great.

The key is the opposite of day trading. Of waiting out the dips and only selling when it spikes. The problem is most people invest with money they will need in the next few years so they panic when it dips and sell incurring a loss only to see it rise right after as it corrects. Buy and hold investors wait out the dips but they are in equities that rise so slowly their profits are small. I believe the key to stock market profit is to invest in highly volatile equities tracking stable industries and just wait for them to ramp up. Could be years but if your profit is high its worth it.

Of course using borrowed money for revenue real estate maximizing your square footage is much better but most people don't have the stomach for all that entails and are too stubborn to learn and break down each stage of the process maximizing it. They follow the herd so they get the same results as the herd. Clicking the mouse buying something on the stock market is a lot easier. Too bad you can't use borrowed money to do it. Well you can but the interest will bury you. Just like the fear of interest torpedoes day traders.

When you are shorting something you are needing it to move within a set period of time. This breaks the patience rule of investing. You have to be able to wait out the dips. Usually the market dipped for ridiculous and illogical reasons as well. You have to be able to ride that out. With money you don't need for several years. Most young people should not be in the market for this reason. There are other costs as well as another poster noted. If you want to invest in both directions you need to be able to do that in investment instruments that have very low costs so they don't bury your profits.

I really don't find decay a factor when I look at long term charts for the big 3x leveraged funds like FNGU, SOXL, FAS, TECL and several others. They do well long term. Of course when they dip they dip hugely but who cares? Don't sell and incur no losses. Remember the phrase, "Wake me when its over". We should all adopt that mentality once we've picked good stocks and are watching the world. The market makes little sense at times. Putin's invasion has torpedoed many stocks that shouldn't have gone down much at all. That's the illogical nature of the market you have to ignore when it behaves irradically. Conversely it may spike way more than it should at times (so you can sell at a big profit).

bigblue1ca wrote: ↑ Here's a correlation of several of the more popular 3x LEFTs. If you start in the top left corner and scan down to the right at a 45 degree angle, you can see the correlations of each pair. And you are right they don't move 1 for 1, in fact a couple of pairs have a pretty wide spread (SOXL/SOXS, UVXY/SVXY).

The divergence is a result of the daily rebalancing of the fund's leverage and the impact that volatility has on the fund's returns in conjunction with the leverage. In downward, flat, and roller coaster markets volatility is bad news for LEFTs, but in strong bull markets it can result in larger compounded gains. The best example of which would be TQQQ, which since it was created in 2010, has actually returned over 10x the Nasdaq 100's return over the same time period. This is obviously far above 3x. That said, the Nasdaq 100 had one heck of a good run to achieve that and even then in that time period since 2010, TQQQ had three 50% drawn downs (including the current ongoing one) and half a dozen 25-35% draw downs. And even then, most 3x LEFTs don't come close to the performance of TQQQ or even UPRO and in fact more than a couple have blown up and been delisted (meaning you essentially are left with pennies on the dollar).

LEFTs are high risk investments and I don't recommend anyone go near them unless they've truly done their homework. That means thoroughly understanding what they are getting into in terms of how the fund is structured, how it works in relation to the underlying investment, how the price moves, and what the risks are.

Just a point of order: SVXY is -0.5x VIX and UVXY is 2x VIX

Some high risk but nifty ideas when you start blending these leveraged products - https://www.composer.trade/ ... in a bull market

MichaelZZZ wrote: ↑ I really don't find decay a factor when I look at long term charts for the big 3x leveraged funds like FNGU, SOXL, FAS, TECL and several others. They do well long term. Of course when they dip they dip hugely but who cares? Don't sell and incur no losses. Remember the phrase, "Wake me when its over". We should all adopt that mentality once we've picked good stocks and are watching the world. The market makes little sense at times. Putin's invasion has torpedoed many stocks that shouldn't have gone down much at all. That's the illogical nature of the market you have to ignore when it behaves irradically. Conversely it may spike way more than it should at times (so you can sell at a big profit).

Yep. My investment in TQQQ is currently down 45% YTD, but like you said, wake me up when it's over, which is going to be in 15+ years. No big deal.

PaddyM77101 wrote: ↑ Just a point of order: SVXY is -0.5x VIX and UVXY is 2x VIX

Good catch, my bad.

You posted this link: https://www.portfoliovisualizer.com/ass ... &months=36

I see no chart. What's the point? They talk about annualized return. What planet are these people on? Who cares what it was at the end of the year? All that matters are the highs and lows. Its like looking at the closing price instead of the range. It makes no sense at all. This is the stock market, not a term deposit! Also most of those are some pretty lame ETF's.

Reminds me of "line charts" that take the closing price at the end of a time period. Well it might have dipped or spiked hugely but you'd never know that from a stupid line chart. Nobody should use line charts! All that matters is how high did it go for you to sell and how low did it go for you to buy. When it does those things is immaterial.

MarinersFanatik wrote: ↑ Yep. My investment in TQQQ is currently down 45% YTD, but like you said, wake me up when it's over, which is going to be in 15+ years. No big deal.

Look at how fast it recovered after the pandemic meltdown. I bet it will surprise you. FNGU went up 1275% and 1400% at its peaks. That's called recovery. That's called buy and hold. It really should be called buy then set outrageous price then sell. Then patiently wait for a time like this to buy again. The hardest part of investing I find is not buying. Waiting for a crash. Takes a lot of mental fortitude. Not selling is easy by comparison. Especially with GIC rates so ridiculously low. Though that's improving.

PaddyM77101 wrote: ↑ Just a point of order: SVXY is -0.5x VIX and UVXY is 2x VIX

Some high risk but nifty ideas when you start blending these leveraged products - https://www.composer.trade/ ... in a bull market

Nobody with a brain looks at UVXY. Its a roulette wheel, nothing more. Look at it long term. You think you're going to time the market? Nobody times the market. Only some are lucky and 99% lose. Its a disaster fund.

1: Pick healthy sectors with good forward potential.
2: Pick highly leveraged ETF's that track those stocks.
3: Patiently wait for a dip and buy. It could take years.
4: Patiently wait for a spike and sell. It could take years. Don't diversify much. Just a few. You're tracking sectors after all. Each will spike at different times.
You're probably looking at 100's of percent in profits if you follow these common sense guidelines and do not invest with any money you may need in the next several years. That's the number one rule. You have to be able to wait out the dips. "Wake me when its over" should be the hallmark of every investor in the stock market.

MichaelZZZ wrote: ↑ Look at how fast it recovered after the pandemic meltdown. I bet it will surprise you. FNGU went up 1275% and 1400% at its peaks. That's called recovery. That's called buy and hold. It really should be called buy then set outrageous price then sell. Then patiently wait for a time like this to buy again. The hardest part of investing I find is not buying. Waiting for a crash. Takes a lot of mental fortitude. Not selling is easy by comparison. Especially with GIC rates so ridiculously low. Though that's improving.

I just buy TQQQ every 6 months. No need to worry about timing the market and being concerned about whether you're getting in at a good price or not. Markets go up over the long-term. That's good enough for me.

Some people like to keep UPRO with TMF at 55/45 for small part of their portfolio. There are plenty of math theories that leveraging 2x and 3x is viable. But, does your heart can tolerate those movements? That's another story.

MarinersFanatik wrote: ↑ I just buy TQQQ every 6 months. No need to worry about timing the market and being concerned about whether you're getting in at a good price or not. Markets go up over the long-term. That's good enough for me.

These triple leveraged ETFs are designed for short term trading. They are very dangerous to hold longterm due to a phenomenon called volatility decay.

The higher the volatility the higher will be the decay. This has not been much of an issue over the last decade because QQQ has seen an almost uninterrupted bull run and volatility was low, but times may/will change.

I wouldn't be surprised if this ETF would blow up over the next decade. I still remember when the gold 2x leveraged ETFs blew up in 2009. Gold mining stocks were up 1% over 12 months. Nevertheless, the corresponding double leveraged bear+ ETF lost 87% and the bull+ fund lost 46% over the same 12 month period.

MarinersFanatik wrote: ↑ I just buy TQQQ every 6 months. No need to worry about timing the market and being concerned about whether you're getting in at a good price or not. Markets go up over the long-term. That's good enough for me.

Germack wrote: ↑ I wouldn't be surprised if this ETF would blow up over the next decade. I still remember when the gold 2x leveraged ETFs blew up in 2009.

TQQQ could still drop a lot in price if this market trend continues, but I highly doubt it will ever blow up. It is very heavily trade.

Over the past year TQQQ and SPY are neck and neck for volume. And on down days, TQQQ trades more, yesterday it traded 123M shares vs. SPY's 96M shares. The lower it goes the more action it gets.