comments In ETFs oil 2 an interesting debate has emerged about the curious behavior of leveraged and inverse ETFs on the evolution of the underlying. It turns out that side trends in all these ETFs usually lose but there is no variation between the initial and final price of the underlying . It is not any strange twist of ETF manager, but that is simply because the movements against Minor capital more severely if there is leverage, and the yields are to be implemented later on an already reduced capital, the result can be quite disappointing final.
Laterality and volatility is the enemy number one inverse and leveraged ETFs if there is no clear trend. The strong diurnal variations, one day in one direction and the next day will instead decapitalizing the ETF. Consider a core that is now worth 100, am 80, past 90 and the other 100. It seems obvious that any underlying ETF with that price should not vary during that period, or do so minimally. The first day the underlying loses 20%, the second day gains by 12.5% \u200b\u200band third climbs to 11.1%.
Therefore, the ETF will be worth over 100 * 0.8 * 1,125 * 1,111 = 100. The leveraged ETF x2 (which varies daily double that underlying) worth 100 * 0.6 * 1.25 * 1,222 = 91.65. The short ETF will be worth 100 * 1.2 * 0,875 * 0,889 = 93.35. The leveraged short ETF would be worth 100 * 1.4 * 0.75 * 0,778 = 81.69. As we see, not only over leveraged ETF really the underlying replica. With any of the other, for a lateral movement is lost.
Let's find a real example of the market. The SP500 from 3 March to 18 June 2008 remained virtually unchanged. Increased from 1331 to 1338 pts. If we take the ProShares ETFs on the index in that period, we see how the leveraged lost 0.3%, the short lost 1.8% and short leveraged lost 4.2%. Neither is a great loss, but now let's take the period from the October 9, 2008 to January 8, 2009. The SP500 was at 910 pts at the beginning of the period and finished well, but this period has been more volatile and more ups and downs, not getting anywhere. Let's see how they did ETFs: the leveraged lost 12.1%, the 22.1% missed short and leveraged short lost 36.4%. Conclusion: in times of turbulence and no clear trend, better flee leveraged and short ETFs (and the other almost as well.)
If the trend is strong, there is the curious fact that if we simultaneously bought a bull and a bear ETF, accounting for individual performance of each, usually won when seems logical that one should yield to the other ring. Not that this is the philosopher's stone, as are many exceptions. For example, the ProShares Ultra Technology has fallen 78.84% since October 31, 2007. Clearer downward trend impossible. And yet, buy it and its opposite simultaneously would lose in the same period by 8.5%. But I say that usually wins the combined buying an ETF and its inverse, provided there is clear trend, and as we see, far from always the case.
Now for another interesting concern raised by a reader is more interesting to know if you get short on a long ETF to buy an ETF short. In the previous example, the ETF ProShares Ultra Short Technology from on 31/10/2007 to date we have produced a 61.8% profit. Let us assume that we get shorter as collateral demanded 100%, which is a very big. Interestingly would win a 78.85% short putting in long ETF. Those same ETFs, from 08/15/2008 to 20/11/2008 contradict that first impression, because the short would rise by 171.6% while long-short ourselves we only had reported a 74.47%. put ourselves in an ETF short length limits the benefits to us, which can never exceed 100% because we repurchased never below zero. If the trend is another side that is clearly better be short in the long ETF, since the same initial and final price just lose money, while we have seen that the short-SP500 ETF lost quite volatile at times erratic upward and downward, even without changes in the underlying between initial and final prices. We have seen the case lateral and bassist. Let's see a third case: get bearish with a bullish ETF sold in a rising market. We again UltraTechnology ProShare ETFs. Against trend, we lose bassist 38.2%, while the ETF shorts get bullish causes us loss of 52.2%.
A non-negligible risk is to buy a bass limits our loss ETF initial investment, while short in a bull get our potential becomes unlimited losses if the underlying goes on and on up.
Another question is whether we can get our broker ETFs short durations, which we could do through CFDs on ETFs.
0 comments:
Post a Comment