Posted by gdstacey on 27th of Jun 2009 at 05:28 am
Hi all
I'm a newbie to the TS Mechanical systems and would be grateful
for advise before I spend some money on getting my programming
done
I read much on this site about stock not always being available
for shorting and am considering creating the strategy along
these lines & combinations - i.e. when the short signal is
given to go long the opposing ETF (but only taking the opposing ETF
when the appropriate signal is given by the MA's crossing in
e.g SRS etc)
SRS/URE, SKF/UYG, FAZ/FAS, SSO/SDS
I'd be grateful for any views or experience you have with
this
Posted by mitchellvisa1 on 27th of Jun 2009 at 06:37 pm
You would think that would be a reasonable thing to do, however
my experience is that you will not see the same % moves using the
opposite ETF. My personal experience with SKF/UYG only took
me about 2-3 days to realize I was taking bigger losses on losing
trades with UYG than I would have had with just shorting SKF, and
vice versus on winning trades. I would suggest opening an
account with Interactive Brokers, which has always had shares
available to short in all of these ETF's.
Posted by simon_says on 27th of Jun 2009 at 09:24 pm
All 2x and 3x ETFs have discernible
degradation, particularly in a sideways market like now and are not
long-term trades (i.e. longer than 2-3 weeks at best). Trending
ETF's have inherently less degradation.
However, if you short the ETF you
gain the degradation back, assuming the market has not moved
against your position.
Theoretically, you could
simulataneously short, in equal dollar amounts, both one
sector's ultralong and ultrashort ETFs (e.g. FAS/FAZ) and simply
gain from their inherent degradation regardess of the market's
shenaningans.
Posted by mitchellvisa1 on 27th of Jun 2009 at 10:46 pm
I totally agree. I know a few weeks back it was mentioned
on this blog by some members that FAZ and FAS were the #1 and
#2 largest % losing ETF's for Q1 2009. Does this mean
that we should all margin up our accounts and go short both of the
new 3 X S&P500 ETF's that Proshares has rolled out? I was
thinking about doing some play like that when I heard of these new
ETF's the middle of last week. Your thoughts?
Posted by mamaduck on 29th of Jun 2009 at 01:32 am
Be careful. If you had shorted FAS and FAZ on March 6th, or 9th
for that matter, at its height you would have had a drawdown of
130% and to date your drawdown would still be 70% (approx).
In other words, shorting 10K of each on those dates, at its
height you would have been down 26K and to date around 14K. You
would need a lot of patience to ride this one out, or you would
need to time your entry so you don't do it at a market bottom or
top.
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TS Mechanical systems
Posted by gdstacey on 27th of Jun 2009 at 05:28 am
Hi all
I'm a newbie to the TS Mechanical systems and would be grateful for advise before I spend some money on getting my programming done
I read much on this site about stock not always being available for shorting and am considering creating the strategy along these lines & combinations - i.e. when the short signal is given to go long the opposing ETF (but only taking the opposing ETF when the appropriate signal is given by the MA's crossing in e.g SRS etc)
SRS/URE, SKF/UYG, FAZ/FAS, SSO/SDS
I'd be grateful for any views or experience you have with this
Many TIA
Graeme UK
TS Mechanical Systems
Posted by mitchellvisa1 on 27th of Jun 2009 at 06:37 pm
You would think that would be a reasonable thing to do, however my experience is that you will not see the same % moves using the opposite ETF. My personal experience with SKF/UYG only took me about 2-3 days to realize I was taking bigger losses on losing trades with UYG than I would have had with just shorting SKF, and vice versus on winning trades. I would suggest opening an account with Interactive Brokers, which has always had shares available to short in all of these ETF's.
Good Luck!
Shorting ETFs and regaining their degradation
Posted by simon_says on 27th of Jun 2009 at 09:24 pm
All 2x and 3x ETFs have discernible degradation, particularly in a sideways market like now and are not long-term trades (i.e. longer than 2-3 weeks at best). Trending ETF's have inherently less degradation.
However, if you short the ETF you gain the degradation back, assuming the market has not moved against your position.
Theoretically, you could simulataneously short, in equal dollar amounts, both one sector's ultralong and ultrashort ETFs (e.g. FAS/FAZ) and simply gain from their inherent degradation regardess of the market's shenaningans.
Mech Systems
Posted by mitchellvisa1 on 27th of Jun 2009 at 10:46 pm
I totally agree. I know a few weeks back it was mentioned on this blog by some members that FAZ and FAS were the #1 and #2 largest % losing ETF's for Q1 2009. Does this mean that we should all margin up our accounts and go short both of the new 3 X S&P500 ETF's that Proshares has rolled out? I was thinking about doing some play like that when I heard of these new ETF's the middle of last week. Your thoughts?
shorting 3X ETF's
Posted by mamaduck on 29th of Jun 2009 at 01:32 am
Be careful. If you had shorted FAS and FAZ on March 6th, or 9th for that matter, at its height you would have had a drawdown of 130% and to date your drawdown would still be 70% (approx).
In other words, shorting 10K of each on those dates, at its height you would have been down 26K and to date around 14K. You would need a lot of patience to ride this one out, or you would need to time your entry so you don't do it at a market bottom or top.