there is a decay factor in the 2x and 3x ETFs that can make the
returns asynchronous: SRS was down 5.2% today, while URE was up
3.9% and IYR was up 2.1%.
The decay factor only applies if you hold them overnight.
However, intraday, there are also discrepencies depending between
2X, 3X and underlying index.
One more thing. URE closed at 3.43 and a penny move there is a
much bigger percentage of the trade than in SRS. Any slippage and
commission will be magnified. Also any move is slower to come.
If instead of SRS short you took URE long today on the 15 minute,
you would have made 1.7% vs. 2.5% (assuming no slippage or
commission). Difference would have been larger with slippage and
commission.
I see. Thanks. I suspect that there are some like me
that have to buy URE anyway. I trade inside a SEP IRA and
cannot short. So when SRS or FAZ trigger short I buy URE or
FAS. Thank God for short ETF's. I would not have made
much money last year without them.
there is a decay factor
SRS mech systems
Posted by te22 on 6th of Jul 2009 at 04:26 pm
there is a decay factor in the 2x and 3x ETFs that can make the returns asynchronous: SRS was down 5.2% today, while URE was up 3.9% and IYR was up 2.1%.
SRS/URE
Posted by mamaduck on 6th of Jul 2009 at 04:41 pm
The decay factor only applies if you hold them overnight. However, intraday, there are also discrepencies depending between 2X, 3X and underlying index.
One more thing. URE closed at 3.43 and a penny move there is a much bigger percentage of the trade than in SRS. Any slippage and commission will be magnified. Also any move is slower to come. If instead of SRS short you took URE long today on the 15 minute, you would have made 1.7% vs. 2.5% (assuming no slippage or commission). Difference would have been larger with slippage and commission.
I see. Thanks. I suspect
Posted by beta on 6th of Jul 2009 at 04:35 pm
I see. Thanks. I suspect that there are some like me that have to buy URE anyway. I trade inside a SEP IRA and cannot short. So when SRS or FAZ trigger short I buy URE or FAS. Thank God for short ETF's. I would not have made much money last year without them.
I would suggest that you use
Posted by te22 on 6th of Jul 2009 at 10:27 pm
I would suggest that you use URE, or even IYR, rather than FAS, as they are the securities that most closely mimic shorting SRS.