Interesting fund. Price seems pretty attractive right now, particularly since it's not just a number, but an indicator of how overbought the market is, at least for those whose trading style is contrarian rather than follow the pack.
I like the fact that this is a managed basket of shorted stocks rather than an inverse index. The downside is that so long as the market is strong and people are following momentum in risky issues, HDGE is going to fall. During up periods like the recent one the bashers will make merry with HDGE and momentum players will run from it in terror.
The upside is that when the market tanks, whether due to economic conditions, unexpected disaster, or something else, panic selling in these same issues will cause HDGE to outperform any of the inverse index ETFs by a wide margin.
This is really a wait and see thing, because we haven't yet experienced the market conditions under which HDGE could soar. We have only seen the market conditions under which it must lag.
I'm curious how people are using HDGE right now. What is your strategy?
Has anyone tried buying in anticipation of corrections and then selling afterwards, and if so what were the results?
It occurs to me that HDGE could also be used as "disaster insurance." You could buy it when you believe it is cheap based on market valuations and set a high limit sell for all or part of your shares. In the event of another "flash crash" or any other kind of unexpected disaster that destroys the market, owners of HDGE will profit handsomely.
How would this strategy compare to another like, say, buying out of they money puts on major indices? For one thing, it would be a lower maintenance strategy, since you wouldn't have to worry about recurring expiration.
I'm interested in hearing what others think and how they use HDGE.
Agree with your assessment that this is better than the inverse ETFs under market sell off conditions. With the Russell 2000 PE over 30, small caps are hugely over valued. Just day trading for now waiting for the VIX to spike down indicating a top. I have a small HDGE position but at that point I will continue averaging in.
I think you have the right plan to average in--I have orders in under 16 for HDGE. I think the boyz can do it--that is make it to an all time high in the SPX, although it may not happen immediately. I asked about alternatives because I don't like putting all my bear market eggs in one basket--although I am having trouble finding suitable baskets. UUP does not track the $USD index at all well. $USD may be headed to 74-76, after that it will probably go up, but I don't think UUP captures the rise very well. Most bond funds like TLT, EDV etc. need to sell off a lot more before they become suitable bear market holdings. I am thinking more for the second half of '13 on and appreciate anyone's thoughts!!
With the HIGH expense ratio, it will eat into any gain you could make. Add to this that there were times this was down even when the market was down, it doesn't hold up very well. Read other people's posts on this etf.
If you look at periods when the market contracted sharply, HDGE did very well. In those periods, HDGE beats the inverse ETFs handily. But when the market is steadily grinding up, HDGE will do poorly. Last quarter, they also got killed on some short picks, where they just got their earnings estimate completely wrong; GMCR is the best example, and they are still stuck in that stock (although they are only short about 80,000 shares now, compared to 320,000 when GMCR reported earnings last). They seem to be doing better on earnings calls so far this quarter; they have gotten several right, with big gains, including COH and PRXL.