Tradefair & Financials
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I would like to buy an inverse DJ ETF so that if the index falls, the value goes up (of course it goes down if the index rises). I've done soem googling but have failed. Would someone please point me in the right direction. Thanks
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There is one here:
. http://www.proshares.com/funds/dog.html and an ultra-short one here: . http://www.proshares.com/funds/sdow.html If you are not familiar with these products, you should make sure that you read and fully understand the implications of tracking indexes over a single day and how returns are affected over a longer period. If you don't, you are very likely to be disappointed. |
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Have you considered just using spreadbetting to short it? is the easiest way imo and can get in and out very fast, which is what you need in these times.
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You seem like a knowledgeable fellow, why don't you save the lad the time and just tell him what he needs to know about the nuances of trading with leveraged ETFs, instead of telling him to "read fully"?
Waiting in anticipation. |
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melly now desperate for advice but too shy to ask directly, it's er, for a friend.
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The problem with spreadbetting is that if you sell at (say) 13000 on day one and it goes up to 13500 you have done your conkers and it is no consolation that it falls to 12500 the next day unless you've gone back in again. OK you can use stops. However, if I've understood it correctly you buy some ETFs for (say) £1000 and in the above scenario they are worth (say) £900 at the end of day 1 but (say) £1100 at the of day 2. Happy to be told I've got it wrong.
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The suggestion about spreadbetting is not even worth commenting on so I'll leave it alone, I don't need another dog fight on here.
Leveraged ETFs suffer from something called "decay" because they increase leverage on up days and deleverage on down days as they "reload" on a daily basis. Over a long enough time frame, although the underlying index may have gone nowhere, the leveraged ETF tracking the index will go to ZERO (yes, you're reading this right) because of all the daily volatility in between. Bottom line, if you are a day trader and your intention is to use leveraged ETFs to time and play short term moves in the market (say no longer than a week), leveraged ETFs can be a very effective trading tool. If are an investor with a longer planning horizon and your intention is to use leveraged ETFs for long term plays, you'll end up losing money regardless. It's called "decay" for a reason. |
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Thanks Menelaus -very helpful.
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