my break even on this is $8. I know this thing decays and will never come close to $100 again, but does anyone have a ballpark equation for what would have to happen for this thing to double from here? I'm not going to sell at the low, but I need to know at what price to cut my losses and get out.
if stock drop 5% and up 5% then decay is 0.25%
if stock drop 10% and up 10% then decay is 1%
if stock drop 20% and up 20% then decay is 4%
if stock drop 30% and up 30% then decay is 9%
the decay can be calculated by (1+a)*(1-a)= 1-a^2
this is only estimation but it is 95% and it is the worst case
if Finance will be back to there low from March \
FAZ will hit 50 easy
Your post is BS. Folks do the math here. Let's say in a best case scenario for FAZ, the RIFIN drops 7% (i.e. FAZ rises 21%) every day for 2 straight weeks (10 trading sessions). That would put us from 687 to 332 on the RIFIN (below the 338 March 6 low) and $30.21 on FAZ (assumes compounding 21% daily with zero decay).
The fact of the matter is, the above scenario is not going to happen in this market, obviously. FAZ is a leveraged vehicle that should only be day traded & never held overnight, unless you are a gambler that likes to literally give their money away. FAZ is dead money, it as heretofore been infinitely relegated to the land of single digit dead levered ETF's. It will never recover to previous dollar prices ever again. A double from here would likely be a best case hope for longs, and the probability of that occurring lessens substantially each day the market ticks higher from here.
It is arithmetic. The decay thing happens at every reset at market end. Bottom line is (without going into the simple math) the faster you are in and out (without high voliatility to boot) the better you are with aleveraged fund....
The general equation is a partial differential equation which gives a family of possible responses.
A more simplified version of the volatility tracking error (aka...slippage or decay) of FAZ and FAS with the ^RIFIN normalizing to a zero percent ($0 dollar) change over two trading sessions is shown here:
I am not an expect but I would say in thelong run financials will be OK, the whole sector will function again and this chart will end up in the pennies. THe government will do anything including cooking books, media ...etc. to stabilize the market confidence. At the same time the financials were overbought, or shoul dI say there will be people who woul dlike to take short term profit of at least 50%, so I woul dnot sell now. I would wait for the next bad news which will shake up the street, and it will come believ eme and then I will kiss goo dbuy to this index... Sorry you lost money. Ihope it was not much but too risky to be in for the long run. Best of luck and I hope I was helpful.