back in time. Let us place ourselves in the middle of 2007, the year of excess credit even with the bags on top.
We are a seasoned speculator, of those who see them coming, and we sense that the stock will fall.
The S & P 500 over 1,500 points. We are convinced that it will fall and we want to make money doing it.
our operations is long term, so we decided to dispense with the future and cumbersome maturities. ETFs are a hot commodity, and seek our ETF bearish on the S & P 500.
But heck, we are very confident that it will fall, and prefer to earn double what the index lower. It would be foolish to settle for less. We chose
ETF ProShares UltraShort S & P 500 . The leveraged ETF is down and, in particular vary daily vary double what the S & P 500, and counterclockwise.
The perfect product for our plan: each day the index down 5%, 10% we will win!. We're going to cover! .
Under these lines, the graph of S & P 500 since that time (click to enlarge)
entered on May 30, 2007 at the opening of the market. The index is at 1,514 points. ETF bought our $ 52.50.
Today we have the index around 978 points , below 35% then!, we have covered!, but we are also leveraged and earn twice what low rate!
We looked at the price of the ETF on today and found that is only $ 48!
How is it possible? (Read the curious behavior of the ETF )
After successful the mainstream and have lowered the benchmark index by 35%, not only have we not won, but we have lost over 8%!
Chart ETF leveraged bearish on the S & P 500 (Click to enlarge)
has obviously been neglected the effect of exchange rates, which in this case would have benefited from investor euros. This ETF has been chosen by the availability of contribution history for years and for being one of the most popular ETF leveraged bearish on rates. Obviously also selling a few months ago would have brought important benefits. But the important thing is that we are aware of the enormous importance of choosing the right financial product, wrong choice can be completed in a very bad deal even with the correct initial strategy. The same operation through future would very profitable.
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