A.I.M. Users Bulletin Board

[ls7550]

Hi Ray

The 300% leveraged ETF (SPXL) did almost 6 times better.

I monitor that 'drift' when using leveraged ETF's and periodically make a $0 AIM trade just to reset the leveraged holdings. All manual, but like an AIM within an AIM.

Instead of holding say $21,000 in the non leveraged, I prefer to hold $7000 in the 3x version. When for instance the 1x based AIM (virtual/paper traded only) indicates a buy or sell, typically the price will have trended for a while and leveraged ETF's, as you've noted, tend not to move in relative proportion over periods longer than a single day. The drift between a third in the 3x value and the 1x value over time has a zigzag type motion with the 3x value moving around the 1x value. Even if AIM isn't indicating a trade, periodically generating a $0 AIM trade manually will result in a 3x holding trade (revised to a third of the current 1x AIM stock value). Over the last couple of years that's added around 1.5% to annualised gains compared to not having "AIM'd" the relative 3x motions.

The last such trade I made was back in March, but that wasn't the best choice as the gap has widened further. Perhaps I should set up a AIM to monitor/signal those trades rather than just flying by eye :)

Clive.