[stephenNUTS]

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I would stay very far away from these investments.

First, stocks have a positive expectation (derived from the risk premium). Shorting an asset with a positive expectation is -EV.

Second, these leveraged ETFs are only trading instruments. Do not hold them for long periods of time. They only capture twice the daily returns, but capture much less over the long run .

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Absolutley TRUE...I dont have the exact math calculations off-hand,but it does seem that TIME def. "decays" their value,and it is CERTAINLY NOT a direct 2x leveraged instrument the longer you hold onto them

The "short" based Nasdaq ETF ....(symbol QID) ...which is supposed to be inverse of "buying a Nasdaq basket of stocks" or QQQQ's for that matter) is a prime example.

Even though you are BUYING this ETF,you are being "sold on the idea/premise" that you are shorting the Nasdaq with a LIMITED downside risk.In other words ...if you BUY 1000 QID's currently trading at $39.91...the maximum loss you can have in theory on this trade if it went to ZERO is $39,910 (obv.minus commissions's of course)

On the other hand if you "shorted" the QQQQ's.....this instrument would have an infinite loss potential.

When comparing these TWO instruments...they DEF dont move tick for tick in opposite directions PERCENTAGE wise(as they are also priced differently) with this perceived 2x move

But it does seem that the 2x expectation is NOT true over longer periods of time ...even MORE so with these short based ETFs.I have found that on the EXTREMELY volatile days...it moves much closer to its 2x "promise"...but without a doubt in a flat market/longer term expectation...it def. has some time decay formula tied to it IMO

When I was trading fulltime in my prime a few years back... they didnt have this particular ETF(the QID)as it is fairly new I believe....and the ONLY way to short the Nasdaq as a whole was to short the cubes .

BUT...I have just heard from trader friends of mine that recently some brokers/clearing houses DONT even allow you to short these cubes any longer?

Has anybody heard similar or had a problem attempting to SHORT the QQQQ's RECENTLY with their respective brokers?


GL
Stephen [img]/images/graemlins/cool.gif[/img]