PSQ Shorts the Nasdaq 100
DOG Shorts the Dow 30
SH Shorts the S&P 500
MYY Shorts the S&P Mid cap
Correction Correction
QLD is
DDM is
SSO is
MVV is
Thanks to Barry Ritholtz and long time reader Riccardo for the info.
Thanks to long time reader Londoner for the correction.
Most people will use them to make short term bets. They will also come in handy to help hedge for longer periods of time even if they struggle to meet their exact objectives.
The double short funds are more appealing to me. If you are interested in hedging with these, you can protect more of your portfolio with fewer dollars or taken another way you don't have to sell as much stock to make room for the double short ETF of your choice.
Another thing to keep in mind, perhaps this is obvious, is if you own one of these and the market starts to go up the one you own will become less and less of a drag on the portfolio. An initial position that hedges 20%, so putting 10% of your portfolio into a double short fund, would drop in value when the market goes up. At the same time the other 90% of your portfolio would be going up. So the more the market goes up the less you are hedged.
10 comments:
Lots of chat about these everywhere... If I read the releases right, however, the QLD/DDM/SSO/MVV selection are double LONG not short! The double short funds are still in the approval process.
Some of these could be useful, from time-to-time. At least it's genuine innovation in ETFs, rather than yet more sliced-and-diced sector or style funds.
On top of that, DOG for the short Dow etf is an absolutely marvellous ticker symbol. These get my vote just for that!!
"The more the rest of your portfolio goes up---the less your are hedged."
True, unless you rebalance occasionally.
g
Just an idle thought: what's the merit of using the leveraged funds not for trading but for the core of a portfolio. If your target is 40% US equity, hold 20% in the leveraged fund (or, say, 15% in the leveraged fund and 10% in style/sector/mkt cap funds as the 40% exposure. You free up capital from your notional US equity allocation , perhaps to hold in relatively low-risk uncorrelated investments for a little bit extra return; and the rest of your portfolio would be as normal.
There's no free lunch - and clearly this could bring about a little more volatility (up 5% followed by down 5% would have a slightly more painful end result in a 2x leveraged fund than in a straight index fund) - so what am I missing here?
George- you are correct but I wanted to point out that the amount hedged changes.
Londoner, This is a huge concept, something I have thought about for years but not sure if I have written about. It is also the concept behind several OEFs.
Assume SSO captures double the SPX perfectly for all times. Put 50% of your portfolio in SSO and you capture the market exactly. Put the other 50% in a money market at 4% (or whatever the number is). You automatically beat the market by two percentage points.
Now factor in that it won't do exactly double and that SSO has a fee. The concept though is very interesting and I think creating this will become easier in time.
Understanding concepts like this can help you better understand portfolio construction in general.
Indeed; it has a fee - but not an outrageous one for effectively double exposure (in effect, the "real" fee for the exposure you're getting is half the published fee...). And, if these funds are like the SGAM leveraged ETFs in Paris, you get double the dividends too - which is rather cool.
If your money market fund at 4% would give you 2% outperformance vs the market - on the assumptions you use - your more aggressive risk taker could look at hedge funds (or other truly non-correlated techniques/assets...), perhaps looking for 6-8% p.a. on average.
That starts to look like a way to have a shot at beating the market by maybe 3-4% a year on average. If your long-term return expectation is somewhere between 7-10%, a decent shot of 3-4% outperformance deserves some serious thought.
On the downside, a 50% market fall wipes out your equity entirely on this strategy, which would be rather a bore, though no more so than it would for a straight 100% tracker...
These are true market innovations. For me, it is like a child in a candy shop.
g
These would allow someone with a smaller account allocate much more efficiently -say that previously you put 30% in U.S. large cap; you could now put in 15% and free up funds for emerging markets, etc.
Also, certain trading models would work well with the increased volatility they offer.
J Banks
Not entirely following you but if I take your meaning correctly, be careful with contoling more stock that the size of your portfolio.
In a $100,000 portfolio if you put $30,000 into the double long SPX and put your other $70,000 into the stock market one way or another your $100,000 is controlling $130,000 worth of stock.
This is no different than being on margin.
Nuclear Fuel for your portfolio
Are you kidding me, why don't I just burn my money.
The article says invest in uranium because nuclear plants could be built in Asia. There's no analysis done as to what the peice of uranium would be if, if any proposed plants were built.
Nuclear plants won't be built because they can't compete with coal, gas or oil, it takes so long to build them and there's no solution to the waste problem.
um none of my RM/TSCM articles tell readers to buy anything.
This is a theme that a lot of people don't know about. The article gave a little big macro a few different ways to be involved and hopefully encouraged more study not a trade
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