It can be argued that the "equilibrium position" is to have twice as much money in SVXY as in UVXY. This way, the total account size remains the same, except for slow decay.*
But the calculation you give implies that it's safe to hold four times as much money in SVXY as in UVXY.*
Given $5,000, we put $4,000 into SVXY and $1,000 into UVXY.*
If the SVXY suddenly goes to zero, then the UVXY suddenly goes to $4,000. After that, it might go up or down. But this 4 to 1 ratio should put us in the ballpark of holding onto our money.*
If SVXY suddenly drops by 50% then UVXY goes up 100%, so we would have $2,000 plus $2,000 after that.*
The trick would be to sell quickly when one or the other is dropping fast, or to sell when it seems to be topping out and about to drop.*
We might have to sell only a portion of each type, and not all. And we would have to rebalance it every so often, based on conditions.*
But this 4 to 1 ratio looks reasonable, when in doubt, taking profits and rebalancing at our own discretion.*
When the UVXY drops by 50%, then the SVXY goes up by 25%. This means that the UVXY goes from $1,000 to $500, and the SVXY goes from $4,000 to $5,000. So, the total would be $5,500, or a net increase of 10%, (not counting decay).*
Doesn't this look reasonable?*
A small gain is better than a big loss.*
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