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  • arwen_imaginary arwen_imaginary May 18, 2011 1:52 PM Flag

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

    '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.

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    • 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!

    • 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

      • 1 Reply to rgneckow
      • Thanks for that RG. I think I'm going to trust my instincts which means I'm following your advice. I don't want a clock ticking on me. I get tempted by these leveraged charts haha, but in reality, I like to hold for a pretty long time. I'm just gonna stick to individual stocks. I raise cash as opposed to shorting. I'm not good at shorting, at least "play" shorting. If I can't find anything to buy or everything is "overvalued" then I'll raise a bit of cash.

 
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