Direxion Daily Gold Miners Bull 2X (NUGT)

[CowBoE]

Its not a thought, but rather a fact. :)

I was quite dumbfounded when I first learned of it.

Its quite easy to see this over a longer period of time.

In mid October 2012, GDX was ~$54, and NUGT was ~$850
meaning NUGT was ~16 times higher in PPS.

As of today, GDX is ~$24 and NUGT is ~$42
meaning NUGT is only ~2 times higher in PPS.

If there was no Contango,
NUGT should have been $24 x 16 = ~$384.

That means, $342 (or ~90% value) was lost to Contango.

Now I'm using rounded up numbers for illustration purposes
but you are looking at essentially about 7% to 7.5%
erosion in NUGT PPS each months.

For quick flippers within days, this isn't that much and
you can ignore it. But those that buy and hold NUGT and DUST
for weeks and months, this is something you MUST be aware of.

If you are going to buy and hold NUGT or DUST...

Its actually better to short NUGT than to long DUST
if you think NUGT will go down.

And its better to short DUST rather than long NUGT
if you think NUGT will go up.

Sounds confusing as hell, but its really simple concept
once you get over the shock of learning this chaotic erosion.

I'm not going to claim to be expert on this matter as I was a
student to few on iHub who's mastered this and shared
their valuable insight.