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Shorting leveraged ETFs - a good strategy?
01-12-2011, 02:39 AM
I've been thinking about shorting leveraged ETFs. They pretty much all lose money long term, so you're pretty much guaranteed to make money eventually as long as you don't get stopped out in the short term.
One ETF I've been thinking about shorting is VXX - this thing is a colossal piece of crap, just look at a long term chart of it compared with underlying volatility index it purports to track. I wouldn't short it now, because there could be a selloff in the markets soon, but the next time there's a selloff and the volatility spikes, wouldn't shorting this thing be a smart move? Is there really a reason not to do it? It seems like it would basically be free money.
Some people here seem to be fairly knowledgeable about trading, maybe someone could offer some ideas.
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Shorting leveraged ETFs - a good strategy?
01-12-2011, 03:15 AM
So when you short it, when do you decide to cover if it goes up? Shorting is risky because it potentially has unlimited losses.
If you short, make sure your can answer that question, if you don't have a solid exit strategy, don't do it.
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Shorting leveraged ETFs - a good strategy?
02-10-2011, 12:36 AM
why short? almost all ETF have a counterpart that do the exact same price movement, inversely, so you can buy instead.
also ETFs are "products" that can have diffirent rules, for example the "betapros" wich are the most traded for natural ressources on the TSX, reset their overall % gain each morning so even if the chart is huge it doesnt mean the possible gains are there. Also there is a big probability of having splits / reverse-splits wich of course undermine the progress of price. Finally you have the "contango" effect wich adds another layer of complexity.
so you see why I never traded ETFs and when I wanted something leveraged I just played penny stocks.
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Shorting leveraged ETFs - a good strategy?
02-10-2011, 03:29 AM
L'Etranger and VVP: look at a chart of the VXX ETF over the past couple of years and you'll see why I'm thinking about shorting it. It just keeps going down.
I agree that now is not the time to short it because the VIX index is low and the market would seem due for a correction as it has been going straight up for a while now, but the next time the market tanks and the volatility goes up it seems like it would be a no-brainer to go short. It seems like it's basically impossible to lose money because VXX will always go down. Even if the volatility keeps going up after you short VXX and stays high for a while, you will eventually make money.
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Shorting leveraged ETFs - a good strategy?
03-03-2011, 04:04 PM
Thank you Lief, excellent links!