Saturday, June 27, 2009

Who said that Investing is dead?

Proshares looks like they are throwing up a nice lob alley-oop here to me.
.....and I am looking to slam-dunk this "Investment."

Yumm, Fresh $73 & $86 meat.....

Proshares just released two new ETF's to return 3X the sp500 index.

UPRO (3X bull spy)
SPXU (3X bear spy)

Here is some data on a few of past 2x and 3x etf's:

(proshares 2X financial)
SKF opening: 46 (Jan 2007) 42.11
UYG opening: 69 (Jan 2007) 3.91

(direxion 3X sp500)
BGU opening: 57.50 (Nov 2008) 33.69
BGZ opening: 61.50 (Nov 2008) 35.46

(direxion 3x financial)
FAS opening 55.42 (Nov 2008) 9.15
FAZ opening 60.22 (Nov 2008) 4.73

Looks to me like pro-shares is going to hit another homerun and looking to capture that 3X exposure that direxion has.

These are all great Long term "SHORT and HOLD plays"

We all know the decay on these things is horrible and they are ONLY daytrading vehicles, that is common knowledge and overtime all of these (bear or bull version) things rot away in price.

When I say short, I am referring to being short BOTH the bear and bull version 50/50.

However, shorting both at just ANY ole time is NOT the same.
Ex: if one went short on March 8th, both FAS (@ 2.32) and FAZ (@115.50)They would be up 95% on the faz position, yet DOWN 400% on the fas.

So when do you enter? Well that would take knowing what the market is going to do, if we are about to have a major rally OR a major crash, then it might not be the best time to enter these both short, as one has the potential to go UP over 100% thereby making it a losing hedge trade.

Entry and timing IS trading, it's everything.

To me this is not a trading idea, this is an investment.

Example, to enter faz short at 60 in Nov 2008, then have it go to 200, that means your UNDERWATER 300%. (with only a +80% or so FAS to hedge) -220% net.Basically, If you are on the verge of a monster RALLY or a monster CRASH, there can be short term PAIN shorting these things. But in the long run, to me...the evidence is clear, they are all headed lower.

I would expect these to perform just like BGU/BGZ, as they are the same a 3X spy etf.
It is unfair to compair them to FAS/FAZ, b/c that is just one sector.
BGU/BGZ is the only true fair comparision.

BGZ achieved a "max" of 110% gain at it's peak, compared to it's inception price. So again, the outlier tilt is there as a short term risk to at a specific "paused" point cause an underwater position. However one has to look at the most exteme or ranges and specific dates to find such that "ezact" time that short BOTH bgu/bgz was a losing trade, that also came and went in no time.

But that again get backs to the core of what the INTENT of these etf's are for. They are for the volatility junkie in all of us. That takes extra effort, that takes knowing what the market is going to do. I just like an investment to take a core position and not have to think about it daily when one arises, as they once in a blue moon it seems. (I do remain short gld, long dba for the long term also)

If you think the market is going to rocket higher for the next 2hrs, you play BGU (not spy). That's because you are trading.This is not a trade, this is an INVESTMENT.Buy and hold might be dead, so may short and hold..... but short and hold (levered etf's) is not.

Disclosure: I will be looking to get short BOTH upro and spxu for a long term core play, (ameritrade, options express, think or swim, or if need be I will open up a new account to obtain shares short) If the market crashes or has a monster rally (and ones goes up over 100%)...i will suck it up short term, no worry...gravity loves the leverage. I plan on holding them both short for possibly even years.
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