Short Term Trading Member Forum

[bobjack]

Senty, FWIW, here is my take, and it is worth what you pay for it.
I don't understand the real inner workings of leveraged and inverse ETFs. I have read some about Proshares (their ETFs) at the profunds site. You can google the etf or read about them on yahoo finance and other places.
There are expenses and they will hurt you IF you sit in a LEVERAGED etf for several/MANY weeks/months.

1) Leveraged ETFs are made for trading, not long term investment

2) They have their own peculiar characteristics, just as you and I do. They "Strive" for 2X in the case of QID and QLD.
They vary from 2X at times - sometimes one will be 1.5, while the other will be 2X or 2.5X. Think about trying to constantly buy/sell stocks in a batch holding to try to emulate the index that they track. Big deal to try and hold exactly 1X. Now, add another level of complexity to that by trying to leverage it to 2X, and even worse to -2X. It is amazing that they track as well as they do.

3) You should look at long term comparison charts (perfcharts at stockcharts.com or prophet.net) of NDX, QQQQ, QID, and QLD

4) You should look at 1 Min by 20 Day comparison charts (perfcharts at stockcharts.com or prophet.net) of NDX, QQQQ, QID, and QLD. Zoom in and scroll from start of chart to end of chart. Note the exaggerated open prices in these last 2 weeks -- sometimes the open prices are more like 3X compared to corresponding Index(especially for MZZ) in the last 2 weeks.
Look at the exaggerated PEAK prices intraday, on a really fast moving day.

5) Shorting $10,000 of MZZ vs Buying $20,000 of MDY (assuming that you covered on a morning gap up, say at 9:35/9:38) would have netted you a lot more money.

6) If you want to know why, you will have to dig that up yourself, I understand that kind of action relative to options, but the story goes that leveraged ETFs us futures and SWAPS (whatever that is).

7) Without understanding how all this works, you can Observe how it works by studying the charts, and pick the one that will/should work best for you. The charts don't show the spreads in bid/ask. You have to watch those real time.

8) "Some investors appear to believe that the liquidity of an ETF is dependent on the fund's average trading volume, or the number of shares traded per day. However, this is not the case. Rather, a better measure of ETF liquidity is the liquidity of the underlying stocks in the index. Understanding this fact requires a brief look into how ETFs function on a basic level.
----- Quote from:

http://finance.yahoo.com/etf/education/05

See also:
http://finance.yahoo.com/etf/education

This yahoo info appears to be several years old from the references made in the articles, which are not dated - few that I read any way..

bobjack