My gut told me that shorting a 3x fund was not as good as holding long the 3x fund. The data for the last IWM down cycle does not support my feelings. I learned something here.
However, you need to check as see how much your broker is charging for shorting. With interest rates up, brokers are getting pretty aggressive. But could still be a good deal.
TNA TZA Jul 31 41.59 21.78 Oct 27 21.82 39.84 gain 90.6% 82.9%%
The post that I sent you with the prices of TNA and TZA are correct and the movements are correct, being about the same. But Jaws pointed out to me that when you translate those prices into shares, it tell a very different.
On July 31, you had to make a decision, either buy TZA or short TNA. Here is the issue, because of the price differences the number of shares would be very different. For a potential $5,000 buy or short, you would end up with 230 shares of TZA, but only -120 shares of TNA. Yes the drops are almost the same, but you only have half the number of shares for TNA, therefore your gain will be about half also.
I first put up a post this morning and then took it down. Maybe some of you saw it before I could get it down. I started off with "Never never hold a 3x fund that is dropping." I would have to say this also holds for shorting a dropping fund. This is added information for me. My math for working with shorts needs to be improved a bit.
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