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#11
11-20-2007, 10:20 AM
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Re: Ultrashort ETF: Good if Feeling Bearish?
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It sounds like you have money in shorts and longs in a similar market. I'm not sure what the regular mutual fund is, but it seems to me that your 2 investments are cancelling each other out. [/ QUOTE ] No. You can use shorts to do a lot of things. One thing that a lot of people do is use shorts to be "market neutral:" Market Neutral 
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#12
11-20-2007, 10:34 AM
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Re: Ultrashort ETF: Good if Feeling Bearish?
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[ QUOTE ] 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. [/ QUOTE ] this is very poor reasoning. [/ QUOTE ] I know his reasoning can't be correct, but I don't see why. Can you explain further?
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#13
11-20-2007, 10:39 AM
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Re: Ultrashort ETF: Good if Feeling Bearish?
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[ QUOTE ] [ QUOTE ] 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. [/ QUOTE ] this is very poor reasoning. [/ QUOTE ] I know his reasoning can't be correct, but I don't see why. Can you explain further? [/ QUOTE ] I feel dirty. Like a poker player just threw up on my wall street journal.
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#14
11-20-2007, 10:45 AM
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Re: Ultrashort ETF: Good if Feeling Bearish?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] 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. [/ QUOTE ] this is very poor reasoning. [/ QUOTE ] I know his reasoning can't be correct, but I don't see why. Can you explain further? [/ QUOTE ] it is very simple. shorting an asset with a positive risk premium can be + EV. if you expect the price to move down to a certain degree within a certain timeframe, why would you not short it? look at it in the converse. since ALL assets have some risk premium built into them (except developed world currencies), gull is saying that it is -EV to be short anything. that is clearly not the case since there are many a time when ex ante being short is correct and + EV. even breaking apart the term "risk premium" we see that you are being compensated for taking risk. risk implies volatility and volatility implies up and down moves. if you can forsee a downmove (not easy but certainly doable) and you have the ability to take a short position in it, clearly you can profit in expectation. Barron
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#15
11-20-2007, 11:06 AM
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Re: Ultrashort ETF: Good if Feeling Bearish?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] 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. [/ QUOTE ] this is very poor reasoning. [/ QUOTE ] I know his reasoning can't be correct, but I don't see why. Can you explain further? [/ QUOTE ] it is very simple. shorting an asset with a positive risk premium can be + EV. if you expect the price to move down to a certain degree within a certain timeframe, why would you not short it? look at it in the converse. since ALL assets have some risk premium built into them (except developed world currencies), gull is saying that it is -EV to be short anything. that is clearly not the case since there are many a time when ex ante being short is correct and + EV. even breaking apart the term "risk premium" we see that you are being compensated for taking risk. risk implies volatility and volatility implies up and down moves. if you can forsee a downmove (not easy but certainly doable) and you have the ability to take a short position in it, clearly you can profit in expectation. Barron [/ QUOTE ] Ohhhhh Barron, you and your silly multi-paragraph answers. Next time just say "short-run vs long-run"
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#16
11-20-2007, 11:34 AM
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Re: Ultrashort ETF: Good if Feeling Bearish?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] 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. [/ QUOTE ] this is very poor reasoning. [/ QUOTE ] I know his reasoning can't be correct, but I don't see why. Can you explain further? [/ QUOTE ] it is very simple. shorting an asset with a positive risk premium can be + EV. if you expect the price to move down to a certain degree within a certain timeframe, why would you not short it? look at it in the converse. since ALL assets have some risk premium built into them (except developed world currencies), gull is saying that it is -EV to be short anything. that is clearly not the case since there are many a time when ex ante being short is correct and + EV. even breaking apart the term "risk premium" we see that you are being compensated for taking risk. risk implies volatility and volatility implies up and down moves. if you can forsee a downmove (not easy but certainly doable) and you have the ability to take a short position in it, clearly you can profit in expectation. Barron [/ QUOTE ] ok, but would you agree that since stocks as a whole have a positive expectation that it should theoretically be more difficult to find a good short than a good long?
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#17
11-20-2007, 11:39 AM
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Re: Ultrashort ETF: Good if Feeling Bearish?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] [ QUOTE ] 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. [/ QUOTE ] this is very poor reasoning. [/ QUOTE ] I know his reasoning can't be correct, but I don't see why. Can you explain further? [/ QUOTE ] it is very simple. shorting an asset with a positive risk premium can be + EV. if you expect the price to move down to a certain degree within a certain timeframe, why would you not short it? look at it in the converse. since ALL assets have some risk premium built into them (except developed world currencies), gull is saying that it is -EV to be short anything. that is clearly not the case since there are many a time when ex ante being short is correct and + EV. even breaking apart the term "risk premium" we see that you are being compensated for taking risk. risk implies volatility and volatility implies up and down moves. if you can forsee a downmove (not easy but certainly doable) and you have the ability to take a short position in it, clearly you can profit in expectation. Barron [/ QUOTE ] ok, but would you agree that since stocks as a whole have a positive expectation that it should theoretically be more difficult to find a good short than a good long? [/ QUOTE ] no because if you are investing from a tactical standpoint, you want your signal to be equally likely to generate a positive vs. a negative. risk premiums take a long time to acheive vs. tactical positions which reach fruition over much shorter time spans. so basically, you want a uniformally distributed signal which is equally likely to go short as long. i think i'm rambling again and CF covered it anyways. short term vs. long term. Barron
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#18
11-20-2007, 12:10 PM
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Re: Ultrashort ETF: Good if Feeling Bearish?
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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 . [/ QUOTE ] 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]
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#19
11-20-2007, 01:30 PM
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Re: Ultrashort ETF: Good if Feeling Bearish?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] [ QUOTE ] 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. [/ QUOTE ] this is very poor reasoning. [/ QUOTE ] I know his reasoning can't be correct, but I don't see why. Can you explain further? [/ QUOTE ] it is very simple. shorting an asset with a positive risk premium can be + EV. if you expect the price to move down to a certain degree within a certain timeframe, why would you not short it? look at it in the converse. since ALL assets have some risk premium built into them (except developed world currencies), gull is saying that it is -EV to be short anything. that is clearly not the case since there are many a time when ex ante being short is correct and + EV. even breaking apart the term "risk premium" we see that you are being compensated for taking risk. risk implies volatility and volatility implies up and down moves. if you can forsee a downmove (not easy but certainly doable) and you have the ability to take a short position in it, clearly you can profit in expectation. Barron [/ QUOTE ] Ohhhhh Barron, you and your silly multi-paragraph answers. Next time just say "short-run vs long-run" [/ QUOTE ] QFT
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#20
11-20-2007, 02:06 PM
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Re: Ultrashort ETF: Good if Feeling Bearish?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] 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. [/ QUOTE ] this is very poor reasoning. [/ QUOTE ] I know his reasoning can't be correct, but I don't see why. Can you explain further? [/ QUOTE ] It's unfortunate that certain posters display their arrogance in answering a question that's been put forth honestly with the intent of gaining some knowledge. Actually it's really not poor reasoning per se IMO. For some reason many people think they always know what the price of a stock should be. Of course they probably wouldn't be trying to impress us with their knowledge if that was actually the case. There are many reasons to short a stock and of course one reason is that you believe it's over valued for whatever reason. Doesn't have to be a short term trade either.
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