I've been reviewing my options for short index instruments to
hold for the long term (possibly multiple years) and am
interested in peoples views on counter party risks. Having read
previous posts I'm mostly steering away from 2X inverse funds
partly because of decay issues. My 'short-list' currently reads
as
1. Short the SPY
2. Short UK FTSE 1x inverse ETF's - LSE:XUKS (Deutsche
bank)
3. Maybe small holding of short UK FTSE 2X inverse ETF LSE:SUK2
(Soc. gen)
Has anyone any views of inherent risks within capital structures
of these vehicles or where/how to research this further - I've
read some research suggesting DB might not be a great place to be
because of its relatively weak capital structure
Holding ETF's long term imo is a waste of valuable capital.
There appears to be time decay in all the ones I have held since
Oct 09. I subscribe to BAM and have held a number of ETF's they
recommended since Oct 09 and can categorically state that whilst
the indexes the etf's track are trading a lot lower than when I
purchased these etf's (SPX 1095ish) the actual etf's have in most
cases failed to trade anywhere near the prices achieved in the Feb
low of 2010 even though the SPX has traded 34 points lower to date.
I have had to double up on a number of them which is a no no just
to get my break even price down to current levels. FXP is a good
example. China's market are trading at Apr 09 levels whilst FXP is
30% lower than the Feb spike low. SRS, FAZ, EDZ, QID, RWM and SSG
are just as bad. Even SPXU which traded at $40 in Oct 09 has
only just achieved that price today even though the SPX traded 80
odd points lower.
I agree that
inverse funds have disadvantageous decay issues unless held for
only a few days. You have to watch them very carefully, and have
tight stops. Also agree that DB might not be the best place to be.
Consider SH and RWM for mid-long term. Good luck.
Richard
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Counter party risks
Posted by gdstacey on 1st of Jul 2010 at 12:30 pm
Hi
I've been reviewing my options for short index instruments to hold for the long term (possibly multiple years) and am interested in peoples views on counter party risks. Having read previous posts I'm mostly steering away from 2X inverse funds partly because of decay issues. My 'short-list' currently reads as
1. Short the SPY
2. Short UK FTSE 1x inverse ETF's - LSE:XUKS (Deutsche bank)
3. Maybe small holding of short UK FTSE 2X inverse ETF LSE:SUK2 (Soc. gen)
Has anyone any views of inherent risks within capital structures of these vehicles or where/how to research this further - I've read some research suggesting DB might not be a great place to be because of its relatively weak capital structure
Thanks in advance for your help
Graeme UK
Holding ETF's long term imo
Posted by phillw on 1st of Jul 2010 at 01:02 pm
Holding ETF's long term imo is a waste of valuable capital. There appears to be time decay in all the ones I have held since Oct 09. I subscribe to BAM and have held a number of ETF's they recommended since Oct 09 and can categorically state that whilst the indexes the etf's track are trading a lot lower than when I purchased these etf's (SPX 1095ish) the actual etf's have in most cases failed to trade anywhere near the prices achieved in the Feb low of 2010 even though the SPX has traded 34 points lower to date. I have had to double up on a number of them which is a no no just to get my break even price down to current levels. FXP is a good example. China's market are trading at Apr 09 levels whilst FXP is 30% lower than the Feb spike low. SRS, FAZ, EDZ, QID, RWM and SSG are just as bad. Even SPXU which traded at $40 in Oct 09 has only just achieved that price today even though the SPX traded 80 odd points lower.
phillw - what is BAM? eom
Posted by darnelds on 1st of Jul 2010 at 03:47 pm
Counter party risks
Posted by frien13d on 1st of Jul 2010 at 12:52 pm
I agree that inverse funds have disadvantageous decay issues unless held for only a few days. You have to watch them very carefully, and have tight stops. Also agree that DB might not be the best place to be. Consider SH and RWM for mid-long term. Good luck.
Richard