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Petróleo Brasileiro S.A. - Petrobras Message Board

  • jaquecroissant jaquecroissant May 18, 2011 11:20 AM Flag

    OT: What's the best way to use leveraged ETF's?

    Hi Everyone. OK, I've never used any leveraged etf's. I have read in many places that the decay is a real problem if you hold the etf a long time due to the daily rebalancing, etc.

    Main question: How long can you realistically hold QLD and get the return you think you should get once you've sold it?

    I'm thinking of using QLD to try and capture the Christmas rally, or 2nd half of the year phenomenon. Are we talking days, weeks, or even 2 months? This is course, would just be a one of 15 positions in my portfolio. I'm not betting the full house.

    btw- I can't short, I have heard some say that you get better results shorting a "short or inverse" etf to get a long result.

    Thanks,
    J

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    • They are basically a China play. 80% of their biz comes from China. If Jim O'Neil from Goldman is correct about China booming in the second half of this year, and I hope he is, CLF shall benefit.

    • J: My experience has been closer to Arwens than to RGs. I did well shorting Emerging Markets during the crisis with the 2x inverse (short) etf EEV. have also used it to hedge against losses in long positions, e.g. when I was long Brazil and wanted to protect paper profits rather than sell when corrections occurred.

      Observations:

      - Extreme volatility day to day... sometimes unexplainable.
      - Useful if you think a trend is well established and you want leverage to double down on your bet.
      - Much easier than shorting a security... just buy the ETF... no limits to ones ability to purchase that I am aware of.

      Useful tool... check out the chart on 2x silver etf, AGQ... whoa!
      http://finance.yahoo.com/echarts?s=agq

    • 'Hi Jaques , there is big decay in etfs but if you find one with the right trend doesn't really matter now does it? I mentioned CORN , a few days back no-one answered me, It is on FIRE. Doc mentioned it, i also like TBT it could be a good long term bet considering it is an etf. Who cares 5% decay if TBT goes up 30% a year for the next 3-5... In a normal world this should happen, but with thebananacake, who knows.GL.

      • 3 Replies to arwen_imaginary
      • Hmmm, the prospect of higher interest rates...

        I'm also trying to decide when and how to play this if I do.


        Daily price resets for some ETF's are deadly if held over time and I think most here familiar with that idea now.

        Then there's the ETF's that are based on constant rolling of commodity futures contracts where sometimes you have a contango market that can also be a hazard.(i.e. Buy high, sell low on each roll).

        Buying TBT vs shorting TLT (or buying puts) are things I have considered and I lean towards shorting TLT or maybe buying puts.


        http://finance.yahoo.com/q/bc?t=1y&s=TBT&l=on&z=l&q=l&c=tlt

        then I wonder...might I be better off shorting interest rate sensitive stocks (or sectors) of the market instead..

        Then I wonder about a pair trade to capture the effect:

        Maybe short consumer discretionary(XLY) and go long consumer staples (XLP)???

        What an awful way to have to 'invest'.

        Thanks to the masters of the financial universe and their bought-and-paid-for politicians, the idea of investing in long term steady growth in the OECD is dead as a concept.

        That said, I still think preserving real purchasing power remains a valid concern and for LT investors , commodities like oil, metals and minerals' exposure is essential.

        Call it a defense against a corrupt CPI.

      • I'm not saying I haven't played them, but you need to know what you are dealing with. Some brokers wont allow their clients to trade them because of the risk factor. They are not for the average investor.
        If your gonna leap a train, you don't have to leap a train with a negative bias.

        Here is another example using the same ETF's as before but a three months chart instead. You will see that the long side is up only 7%... while the short side is down about 12%.
        http://finance.yahoo.com/q/ta?t=3m&s=DIG&l=on&z=l&q=b&c=dug

        Good luck

      • Thanks arwen. Good points. I have been watching that CORN etf. I saw your post. I bought CLF at 85 yesterday during the "crash". I like the company. The CFO, Laurie Brias was on CNBC earlier today. I've been wanting to get a position in CLF for awhile now.

        As for ETF's, I'm just now thinking of using them. I tend to just pick stocks I like. Too many possibilities!

    • j

      Shorting both the long side and the short is the ticket to many of those leveraged ETF's, like money in the bank. Since you can not, I would not recommend trading any of them other than for daytrading. Many of them are actually rebalanced daily. It's a loosing game to hold, but I've tried to find out how long might be advised. I don't think anybody is going on record as to make a statement on that... to subjective and too risky.


      A picture is worth a thousand words. These two oil etf's are exact opposite 2X:
      http://finance.yahoo.com/q/bc?t=5y&s=DUG&l=on&z=l&q=l&c=dig

 
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