Some of you are probably aware of this already, put I'll post it
here, I got this message from a member here. It's important
to note because this could affect the EOD mech systems
performance. However on the good side, this change should
cause less time degradation for these ETF's, which will make it
easier to hold them for longer periods of time.
---
Hi Matt,
You probably already are aware of the changes in investment
strategy for the Direxion Ultra Long & Short ETF's, which
includes FAZ. Their new strategy now is to return double
their underlying index over a 30 day period investment
period. Previously, they were designed to return triple their
underlying index on a daily basis. Jerry
Ultra shorts degrade over time because they hold derivatives
which are purchased with a time premium built into the price. It is
in essence a synthetic
put
optionand that's where you get the price decay over
time.
Now if only "good answers" could make me money. I'm
currently on the wrong side of every single trade. ......some long,
some short! Think maybe I'll go back into politics!
Leveraged ETF's
Posted by matt on 5th of Oct 2009 at 10:58 am
Some of you are probably aware of this already, put I'll post it here, I got this message from a member here. It's important to note because this could affect the EOD mech systems performance. However on the good side, this change should cause less time degradation for these ETF's, which will make it easier to hold them for longer periods of time.
---
Hi Matt,
You probably already are aware of the changes in investment strategy for the Direxion Ultra Long & Short ETF's, which includes FAZ. Their new strategy now is to return double their underlying index over a 30 day period investment period. Previously, they were designed to return triple their underlying index on a daily basis. Jerry
Title: FAS? Is this true with
Posted by burkmere on 5th of Oct 2009 at 11:24 am
Is this true with Fas also and when does this "double method" start? Also, which 30 day time period are they talking about?? Thanks.
Does anyone know why the
Posted by user32 on 5th of Oct 2009 at 11:17 am
Does anyone know why the degradation in ultra/ultrashort ETFs happens anyway?
Leveraged ETFs degrade because
Posted by deberah on 5th of Oct 2009 at 11:22 am
Ultra shorts degrade over time because they hold derivatives which are purchased with a time premium built into the price. It is in essence a synthetic put optionand that's where you get the price decay over time.
Title: Ultra ETF tracking Actually it
Posted by twins on 5th of Oct 2009 at 11:34 am
Actually it is a simple mathematical reason, shown by a simple example:
An index goes up 10% one day and down 10% the next (1.1 x 0.9 = 0.99) > 1% loss
Ultra 2x ETF for above index (1.2 x 0.8 = 0.96) > 4% loss
Ultra inverse ETF for above index (0.8 x 1.2 = 0.96) > 4% loss.
Note that the more volatility, the more tracking error (loss).
Fas
Posted by burkmere on 5th of Oct 2009 at 11:37 am
Does anyone know when the "doubling" takes effect and for which 30 day period they ate looking at..also I assume Fas is affected also??
Oh, good answer. Makes sense.
Posted by user32 on 5th of Oct 2009 at 11:26 am
Oh, good answer. Makes sense. Thanks!
Now if only "good answers"
Posted by deberah on 5th of Oct 2009 at 11:38 am
Now if only "good answers" could make me money. I'm currently on the wrong side of every single trade. ......some long, some short! Think maybe I'll go back into politics!
Are you still doing discretionary
Posted by user32 on 5th of Oct 2009 at 11:52 am
Are you still doing discretionary trades, or are you just doing mechanicals? If just mechanicals, how do the equity curves look?
100% mechanical
Posted by deberah on 5th of Oct 2009 at 11:57 am
100% mechanical