One reason I'm cautious about playing DIG is because both DIG
and DUG have one year returns that are negative. Which is
counter-intuitive for things that are supposed to (and generally
do) move opposite each other every day. In other words, while DIG
and DUG mirror one another, the axis is not a flat 0%, but a
downward trending line that over a one year period is currently
-20% return.
Or maybe to put it in simpler terms, if you had shorted both DIG
and DUG 12 months ago, you'd have a 20% return, an arbitrage
play.
Here's a chart, sorry don't know how to hyperlink.
Any way you slice it, from what I have observed, I think all the
ultra long and ultra short funds have very high expense fees.
So if you buy QID when the Nasdaq is at 2400, and then the
Nasdaq goes up, then drops back to 2400, QID is not at breakeven,
meaning not at the same price you bought it at originally
b/c of the high expense fee that is calculated every day I
believe. In fact, you end up with a loss in QID, even though
the Nasdaq is back at the exact same place when you bought
QID. The expense fees for these funds are on Proshares
website. I have found DUG very difficult to play along
with FXP. They just don't make sense to me, but I have found
SKF and SRS very easy to play over the past year with the financial
and real estate mess. Hope this helps.
Interesting, so they charge high fees and yet their performance
is an alarming 10% off, when judged by mirror performance of the
opposite ETF's. I just did a quick check on proshares major
ultra long and ultra short ETF's and they are all off by 10-12%
over a year. That just doesn't make sense to me.
To be fair, it's possible (and highly likely) I'm just not
bright enough to understand how the pricing works for these ETF's
in the first place, and maybe what I'm seeing as "negative returns"
is just how they are set up to run.
Posted by pthoreson on 21st of Aug 2008 at 12:21 pm
There have been many who have questioned whether the performance
of the 2x funds measures up claims. Remember, these are designed
for DAILY returns of 2x the reference index. Over time, the return
cannot equal 2x - it is a mathmetical impossibility. The reasons
have been explained and quantified on several boards, including
SKF, DUG and others.
These ETF's are designed to be used as hedges and as trading
vehicles, not as long term holds. If used in that manner they work
out just fine. But if you compare an index value on a certain date
with the ETF price, then look 6 months later at the same index at
the same level vs the ETF, you will see a difference.
The ultra long and ultra short inverse
funds are --not-- long term holds for sure b/c of these
high expense fees. These funds work much better for
short and intermediate term trades. Just my observation.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
DIG and DUG Question
Posted by iufan20 on 21st of Aug 2008 at 11:43 am
One reason I'm cautious about playing DIG is because both DIG and DUG have one year returns that are negative. Which is counter-intuitive for things that are supposed to (and generally do) move opposite each other every day. In other words, while DIG and DUG mirror one another, the axis is not a flat 0%, but a downward trending line that over a one year period is currently -20% return.
Or maybe to put it in simpler terms, if you had shorted both DIG and DUG 12 months ago, you'd have a 20% return, an arbitrage play.
Here's a chart, sorry don't know how to hyperlink.
http://finance.yahoo.com/q/bc?s=DIG&t=1y&l=on&z=m&q=l&c=dug
Any comments? Is that really how these ETF's are supposed to work or are these two messed up somehow?
DIG and DUG
Posted by andreac on 21st of Aug 2008 at 12:01 pm
Any way you slice it, from what I have observed, I think all the ultra long and ultra short funds have very high expense fees. So if you buy QID when the Nasdaq is at 2400, and then the Nasdaq goes up, then drops back to 2400, QID is not at breakeven, meaning not at the same price you bought it at originally b/c of the high expense fee that is calculated every day I believe. In fact, you end up with a loss in QID, even though the Nasdaq is back at the exact same place when you bought QID. The expense fees for these funds are on Proshares website. I have found DUG very difficult to play along with FXP. They just don't make sense to me, but I have found SKF and SRS very easy to play over the past year with the financial and real estate mess. Hope this helps.
Interesting, so they charge high
Posted by iufan20 on 21st of Aug 2008 at 12:14 pm
Interesting, so they charge high fees and yet their performance is an alarming 10% off, when judged by mirror performance of the opposite ETF's. I just did a quick check on proshares major ultra long and ultra short ETF's and they are all off by 10-12% over a year. That just doesn't make sense to me.
To be fair, it's possible (and highly likely) I'm just not bright enough to understand how the pricing works for these ETF's in the first place, and maybe what I'm seeing as "negative returns" is just how they are set up to run.
Ive noticed the same thing
Posted by delane on 21st of Aug 2008 at 12:21 pm
dig/dug do not trade on par with the oil equivalents. :(
buying QCOM on every dip! whoot yall
DIG DUG
Posted by pthoreson on 21st of Aug 2008 at 12:21 pm
There have been many who have questioned whether the performance of the 2x funds measures up claims. Remember, these are designed for DAILY returns of 2x the reference index. Over time, the return cannot equal 2x - it is a mathmetical impossibility. The reasons have been explained and quantified on several boards, including SKF, DUG and others.
These ETF's are designed to be used as hedges and as trading vehicles, not as long term holds. If used in that manner they work out just fine. But if you compare an index value on a certain date with the ETF price, then look 6 months later at the same index at the same level vs the ETF, you will see a difference.
DIG and DUG
Posted by andreac on 21st of Aug 2008 at 12:20 pm
The ultra long and ultra short inverse funds are --not-- long term holds for sure b/c of these high expense fees. These funds work much better for short and intermediate term trades. Just my observation.