gdl,
I know about the 3X and the 2X.
I had (have) a system for them that I traded for a number of years. I called it the Swap System. I used software to generate the trade signals because I'm too emotional to do it in real-time myself -- better to put rules in the software and let it tell me what to do. I could trade any pair of XLong/XShort, but for some reason I stuck with SDS/SSO, probably because they track better than the others.
The object of the system was to be either Long or Short the market, never in cash.
It's rather curious what you say about credit. Are you referring to card credit or ... ?
The velocity of money is way down, and that would indicate low credit writing at banks, and the accumulation of reserves (as the Fed wanted them to do).
A lot of mortgages have much lower interest rates now, and many mortgages have been refinanced at lower underlying asset prices, so that credit must be a whole lot less than before. Maybe?
And I hear the talking heads on CNBC talking nearly every day about consumers not shopping right now, so ...
I don't know.
I'm surprised the drop today didn't happen days ago. I took advantage of the rise in stocks by selling a bunch of Calls yesterday. I have more Calls expiring this weekend, and for the most part, their underlying stocks are above the strikes so today's drop made no difference whatsoever in my balance. I kinda like that and am getting very accustomed to it. In fact, for the stocks that are above Call strikes, I hope they drop a little more before the weekend so that they aren't assigned, and in that way I don't have to buy them back -- which I would do.
At least I assume some will be assigned this weekend. It actually does happen once in a while that stocks are not assigned away even though they are above strike by a small amount. That happened to me at an expiration earlier this month. I had PHM in two accounts; no shares were assigned in one account and only 40% were assigned from the other. I've even had the opposite happen; I had stock assigned to me that was trading a few cents below the strike of the Calls I bought. That surprised me because I had already called the broker to ask what they would do with profitable Calls if for some reason I didn't exercise them on expiration Friday. I assumed cash would appear, and the guy on the phone said that's what would happen. It didn't. Shares of stock appeared, and money to buy them disappeared. I guess I shouldn't complain, I didn't have to pay any commission, I got the shares a little cheaper than if I had to buy them, and the shares went up right away the next day. Later I decided they probably gave me the shares because I had the money available to buy them; otherwise, I would get cash coming in.
