Author Topic: inverse ETFs  (Read 598 times)

kenmoremmm

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inverse ETFs
« on: March 09, 2020, 10:31:12 AM »
too late to get the goods during this obvious downturn?
https://screener.fidelity.com/ftgw/etf/goto/snapshot/snapshot.jhtml?symbols=SPXS

YttriumNitrate

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Re: inverse ETFs
« Reply #1 on: March 09, 2020, 11:16:02 AM »
A 3x inverse ETF is really better for taking advantage of lucky swings in your favor than a long downturn. Since these are tied to 3x the daily swing, if the market goes up 50 points, and then down 50 points, you lose.

MustacheAndaHalf

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Re: inverse ETFs
« Reply #2 on: March 09, 2020, 10:22:02 PM »
Vanguard won't allow you to purchase 3x leveraged ETFs, so this might be more difficult than you expect.

You agree the market mostly moves upwards, right?  So if you go against the market, you need to consider when you go against it, and when you get back in.  The shorter the time frame, and stronger your data, the better.

I carefully watched the Wuhan virus spread in China, as cases grew +50% per day.  Yet the media wasn't doing any predicting, which is annoying.  So I predicted 10,000 cases and a panic several days in advance, and that's what happened.  I've watched Italy and South Korea fail to contain the virus, and now Italy is resorting to a lock down of the entire country (no longer just the North).  Once the virus takes hold, it spreads rather widely.

The U.S. is behind on test kit production, and way behind on using test kits.  During a similar period of denial in China, when enough test kits were available, the cases grew +50% per day.  So I predict a very fast growth in cases, and reaching 10,000 cases in the U.S. in the next few weeks.

So what I did was sell 7% of my equities and buy mostly bonds.  I don't pay the expense ratio of a 3x inverse ETF, and I get to hold bonds at a time I think stocks will drop.  There's a better than even chance bonds will rise when stocks drop, which could mean an additional gain when I sell.  Overall, selling your own equities is probably better than buying an inverse ETF.

But make sure you're doing it based on data, and with a narrow window for it to go wrong.

johndoe

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Re: inverse ETFs
« Reply #3 on: March 14, 2020, 11:39:53 AM »
I did some searching and am intrigued by something along these lines (SH, SPDN, SPXU). 

Disclaimer: Of my investments about 85% is in retirement accounts that I (somewhat regrettably...) won't touch.  With the other 15% I'm going to go some cash, and would like to hedge bets considering the stage we're at with the virus, panic, etc.

I've seen multiple articles about the inverse ETFs not being intended for long-term use, and most even say it's supposed to be traded over the course of a single day.  I don't intend on holding these longer than a few weeks, but is it really a bad idea to hold over a single night?  It sounds like they won't be 100% effective at inversing of the index, but looking at past performance it sure seems like they're in the ballpark.  What am I missing here, why not hold for a few weeks until things calm down?

Joe Schmo

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Re: inverse ETFs
« Reply #4 on: March 14, 2020, 11:58:21 AM »
I bought a 3x bear fund on 12/24/18...that was quite enough for me to never ever try that shit again!!

MustacheAndaHalf

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Re: inverse ETFs
« Reply #5 on: March 15, 2020, 02:20:41 AM »
I bought a 3x bear fund on 12/24/18...that was quite enough for me to never ever try that shit again!!
Can I ask which brokerage allowed you to make that purchase?  Just for comparison with Vanguard.

Joe Schmo

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Re: inverse ETFs
« Reply #6 on: March 15, 2020, 10:56:45 PM »
Vanguard. Then shortly after they changed the rules...they musta been bent outta shape about my 1k loss :(

MustacheAndaHalf

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Re: inverse ETFs
« Reply #7 on: March 16, 2020, 02:31:43 AM »
Well thanks for doing that, and preventing me from buying a 3x bull oil ETF.  :)