Posted by markwes1 on 28th of Jan 2009 at 07:43 pm
Good article - Crammer's been complaining about this.
One should also note that this will really screw-up any type
intermediate-long/term chart analysis.
Posted by junkmaylbox on 28th of Jan 2009 at 06:07 pm
Yes, one has to trade those ultra shorts rather than to buy and
hold them. For example, XLF retested the November lows last week,
but SKF went only up to 200, not to 300 like before. That's from
about 100. So SKF lost about 50% of its gains by doing a round
trip.
The only question that remains for me, is whether or not one
could trade in and out of it to beat the underlying index (XLF, in
this example). So far I hold a conviction that it is doable. If
not, then indeed using the normal ETFs is the way to go.
What that means in practice is that one needs to use stops and
technical analysis. If SPX is about to go to 900, SKF would go down
to about 100. I don't know about SRS, but $DJR should go up to
about 150 before it reverses.
I will have to see how gains are held tomorrow. Investors
Business Daily calls today a follow-through day to a rally from
Thursday or Friday lows. It could be a bona fide rally or a
carefully engineered bounce.
Posted by junkmaylbox on 28th of Jan 2009 at 08:10 pm
From that analysis also follows that one need not enter the ETF
before the underlying index completed the 50% of its move down.
Then the level under-performance due to inverse compounding would
be exactly balanced by the sit-out time of the trader. In our case
of the projected move from 812 to 900, the trader should need to
stay away from the ultra shorts below 855. Hence today the entry at
865 or higher was a good trade. I still reckon that 50 on SRS was a
good entry. I started scaling in at 60, I need to reduce my cost
basis on that position by trading in and out of the stock, if I
can.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
ALL SKF AND SRS SWING TRADERS SHOULD READ THIS
Posted by depietri1 on 28th of Jan 2009 at 05:02 pm
http://online.barrons.com/article/SB123155505487470527.html
Good article - Crammer's been
Posted by markwes1 on 28th of Jan 2009 at 07:43 pm
Good article - Crammer's been complaining about this. One should also note that this will really screw-up any type intermediate-long/term chart analysis.
depietri1 - well, thanks. I
Posted by Michael on 28th of Jan 2009 at 05:12 pm
depietri1 - well, thanks. I didn't know it was that bad. I guess I'll cover these positions as soon as I can and use the regular ETFs.
Dylan - your DIG/DUG example made me realize this too. thanks.
Notes on ultra short ETFs
Posted by junkmaylbox on 28th of Jan 2009 at 06:07 pm
Yes, one has to trade those ultra shorts rather than to buy and hold them. For example, XLF retested the November lows last week, but SKF went only up to 200, not to 300 like before. That's from about 100. So SKF lost about 50% of its gains by doing a round trip.
The only question that remains for me, is whether or not one could trade in and out of it to beat the underlying index (XLF, in this example). So far I hold a conviction that it is doable. If not, then indeed using the normal ETFs is the way to go.
What that means in practice is that one needs to use stops and technical analysis. If SPX is about to go to 900, SKF would go down to about 100. I don't know about SRS, but $DJR should go up to about 150 before it reverses.
I will have to see how gains are held tomorrow. Investors Business Daily calls today a follow-through day to a rally from Thursday or Friday lows. It could be a bona fide rally or a carefully engineered bounce.
From that analysis also follows
Posted by junkmaylbox on 28th of Jan 2009 at 08:10 pm
From that analysis also follows that one need not enter the ETF before the underlying index completed the 50% of its move down. Then the level under-performance due to inverse compounding would be exactly balanced by the sit-out time of the trader. In our case of the projected move from 812 to 900, the trader should need to stay away from the ultra shorts below 855. Hence today the entry at 865 or higher was a good trade. I still reckon that 50 on SRS was a good entry. I started scaling in at 60, I need to reduce my cost basis on that position by trading in and out of the stock, if I can.