Comments on: Watchlist for 11/12

By: Reaper

Reaper — Fri, 13 Nov 2009 13:52:05 +0000

It depends what your cost of capital is. Plus, you do have the risk of a forced buy-in on your short position. Last I checked most of the leveraged ETFs were hard to borrow.

By: Hezakiah

Hezakiah — Fri, 13 Nov 2009 03:24:58 +0000

In regards to the ultra ETFs:

If you rebalance daily, as in Dan’s sample strategy, your expected return is exactly zero. Ignoring slippage and commissions, you would neither make nor lose any money. If you want to lower the risk of the strategy, you would want to diversify into several pairs of ultra ETFs that track indices with the lowest amount of correlation. Profit margins on this strategy are fairly low, though it should easily beat cost of capital.

By: Preston

Preston — Thu, 12 Nov 2009 20:21:18 +0000

In December I will, wife still in school. SHe is transferring to the University of Houston end of this semester. SHe has two semesters left for her masters in accounting, she still only has two B’s, I don’t know what she sees in me. lol
I’ve picked up contracts through 2010 so it’s going pretty good, not selling my house yet though. My business can be a brutal one at times.

By: Reaper

Reaper — Thu, 12 Nov 2009 20:15:52 +0000

I thought you’d moved to Texas with the new position?

By: Preston

Preston — Thu, 12 Nov 2009 20:13:48 +0000

If KNDI is on watch for tomorrow, does that give me a few more muddled sentences and maybe a duck.

By: Preston

Preston — Thu, 12 Nov 2009 19:42:52 +0000

I just started my 7 hour commute back home.
Level 2 is greek to me so I have no idea what I’m talking about.

By: Reaper

Reaper — Thu, 12 Nov 2009 19:22:00 +0000

inability of sellers to drive KNDI back below 4 and large bids at 4 are very bullish. I’d probably re-buy if I didn’t want to do other things (ie work on my DVD)

By: Reaper

Reaper — Thu, 12 Nov 2009 19:02:43 +0000

This would increase risk. Anyway, with this strategy there is a very low profit margin. It would not meet the cost of capital, especially considering you need to do continuously adjust your hedges. It is not worth the risk as a real world strategy IMHO. But it is fun from an academic perspective.

By: Preston

Preston — Thu, 12 Nov 2009 18:59:44 +0000

Damn, there are some huge sell orders coming across around 4ish.

By: Dan Reagan

Dan Reagan — Thu, 12 Nov 2009 18:59:35 +0000

I remember a while back on CAPS you expressed some interest in shorting both 3x bull and 3x bear ETFs. A large, unidirectional move in the underlying index over many days will cause you to lose money if you do this.

What do you think of a strategy where one puts 75% of his money into the index, uses 25% of his money to short the 3x bull, and rebalances daily? I feel like this would reduce the riskiness of the strategy a lot while still capturing the decay of the 3x ETFs