I think the solvency risk of the shops offering these products is just coming into focus. We just don't have enough data being that most offerings started post '08.

Credit Suisse has so far combated on the lawsuits for the blow up of XIV. So if you do blow up your account, it sounds like there's no recourse through the courts. However, I do remember CS share price dropping 6% or so the day after XIV cratered. It then rebounded on news that their losses were fully hedged against the positions.

If you're not into Hedgefundie's wild ride, you can look at PSLDX or NTSX. I think NTSX is pretty neat as it's founded in the traditional 60/40, but 1.5x both sides. For the equity side, it goes 90% of straight holding while the bond side leverages on a ladder of treasuries. In the end, you end up with a 90/60 fund that's intuitive to the average investor.

All A&M said:

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Solid Analysis HustlerAggie; thanks for sharing. A friend of mine did some of this during the same time period (2011-2019), except he was getting in and out plus mixed in options. He made a killing but with hindsight could have made more if he just bought and stayed in the leveraged fund in 2011. I asked him what would happen to his strategy if there is another 2000 or 2008; his answer is that is why he kept jumping in and out and out and mixing in options; he felt he was protected.

I like your mixed approach but would be interested to see how it would hold up to the last 2 big downturns?

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As I put in the initial post, this guy (link) backtests back to 1987 which encompasses the last 2 downturns. In addition to him, this guy (link) did a backtest using Python, and this guy (link) did a more in-depth analysis of several different leveraged trading scenarios and how they would have performed in the last downturn. There are probably some others out there as well

Most of the analysis I have seen have focused only on 2011 moving forward, though. I know there is a lot of discussion in that HEDGEFUNDIE thread about downturns.

SoupNazi2001 said:

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Just buy E mini if you want leveraged return. Notional value is 50x contract so currently 3260 * 50 so one contract is $163K. The statistics I have seen that are really good is to buy 2x your cash value when S&P 500 closes above 200 day moving average and sell if it closes below 200 day moving average for more than 3 straight days. This keeps you from getting killed in a bear market.

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Do they have options for bonds in e-minis? What are the fees?
I have never messed with them. It appears the volume is quite a bit lower than the ETFs.

I received an email yesterday titled: "Important Notice (You may lose your right to invest in leveraged/inverse funds); Semi-Annual Report"

When I opened it, there was a link to a page on the ProShares page (pdf file):
https://www.proshares.com/important_notice.pdf

Basically says that the SEC is taking steps to limit leveraged and inverse ETFs. This was the first I had heard of this regulation, so thought I would post it here as well.

This is a proposed rule by the SEC and the comment period is open until 3/24/2020. Nothing will come of it for a few months after the comment period.

https://www.sec.gov/rules/proposed/2019/34-87607.pdf

Right as I decided to dip my baby toe into this with a couple thousand dollars.

Will be following this closely.

HustlerAggie said:

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I received an email yesterday titled: "Important Notice (You may lose your right to invest in leveraged/inverse funds); Semi-Annual Report"

When I opened it, there was a link to a page on the ProShares page (pdf file):
https://www.proshares.com/important_notice.pdf

Basically says that the SEC is taking steps to limit leveraged and inverse ETFs. This was the first I had heard of this regulation, so thought I would post it here as well.

---

The Proshare email and link that allows retail clients to send comment to the SEC is pure garbage. Talk about conflict of interest. They don't give one shat if you lose your money.

Bought some UDOW at 124.85 and UPRO 71.92 today. Giddy up!

RangerRick9211 said:

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I think the solvency risk of the shops offering these products is just coming into focus. We just don't have enough data being that most offerings started post '08.

Credit Suisse has so far combated on the lawsuits for the blow up of XIV. So if you do blow up your account, it sounds like there's no recourse through the courts. However, I do remember CS share price dropping 6% or so the day after XIV cratered. It then rebounded on news that their losses were fully hedged against the positions.

If you're not into Hedgefundie's wild ride, you can look at PSLDX or NTSX. I think NTSX is pretty neat as it's founded in the traditional 60/40, but 1.5x both sides. For the equity side, it goes 90% of straight holding while the bond side leverages on a ladder of treasuries. In the end, you end up with a 90/60 fund that's intuitive to the average investor.

---

Thanks for the reply.

NTSX is very intriguing.

PSLDX looks like a lot of volatility with sub-par gains. Am I missing something there?

For the masses, I'm currently experimenting with a small bucket of three leveraged funds.

~40% QLD (going with a 2x here since I'm taking on more risk/reward with Nasdaq index. Explicitly also want the added tech exposure)
~40% TMF
~20% UTSL (utilities are hot right now)

Plan to rebalance weekly - rotating/adding/dropping sectors as they fluctuate; plan to go with a lower TMF percentage as the market recovers from the Coronavirus scare (but right now I'm glad I've got it)

ebdb_bnb said:

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HustlerAggie said:

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I received an email yesterday titled: "Important Notice (You may lose your right to invest in leveraged/inverse funds); Semi-Annual Report"

When I opened it, there was a link to a page on the ProShares page (pdf file):
https://www.proshares.com/important_notice.pdf

Basically says that the SEC is taking steps to limit leveraged and inverse ETFs. This was the first I had heard of this regulation, so thought I would post it here as well.

---

The Proshare email and link that allows retail clients to send comment to the SEC is pure garbage. Talk about conflict of interest. They don't give one shat if you lose your money.

---

I tend to agree.

There are some folks at Bogleheads discussing it:
https://www.bogleheads.org/forum/viewtopic.php?f=1&t=302204

Some people seem to think it is not that big of a deal and some people think it is a bigger deal. I am wondering if they will just have some sort of check to make sure you understand the risks before trading leveraged products? I had to click through and sign forms at Fidelity before trading in them, so it might just be something like that. (hopefully)

Tumble Weed said:

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Bought some UDOW at 124.85 and UPRO 71.92 today. Giddy up!

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Today is a good day to buy both.

deadbq03 said:

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RangerRick9211 said:

---

I think the solvency risk of the shops offering these products is just coming into focus. We just don't have enough data being that most offerings started post '08.

Credit Suisse has so far combated on the lawsuits for the blow up of XIV. So if you do blow up your account, it sounds like there's no recourse through the courts. However, I do remember CS share price dropping 6% or so the day after XIV cratered. It then rebounded on news that their losses were fully hedged against the positions.

If you're not into Hedgefundie's wild ride, you can look at PSLDX or NTSX. I think NTSX is pretty neat as it's founded in the traditional 60/40, but 1.5x both sides. For the equity side, it goes 90% of straight holding while the bond side leverages on a ladder of treasuries. In the end, you end up with a 90/60 fund that's intuitive to the average investor.

---

Thanks for the reply.

NTSX is very intriguing.

PSLDX looks like a lot of volatility with sub-par gains. Am I missing something there?

For the masses, I'm currently experimenting with a small bucket of three leveraged funds.

~40% QLD (going with a 2x here since I'm taking on more risk/reward with Nasdaq index. Explicitly also want the added tech exposure)
~40% TMF
~20% UTSL (utilities are hot right now)

Plan to rebalance weekly - rotating/adding/dropping sectors as they fluctuate; plan to go with a lower TMF percentage as the market recovers from the Coronavirus scare (but right now I'm glad I've got it)

---

I'm not sure what you're looking at. Last year was it's best year on record at +52%.

Here's PSLDX to SPY since '08: backtest.

I was looking at the charts and seeing a price drop from $10 to $8 since 2008.

I didn't look at their dividends... they are ridiculous. No wonder they're a 5 star rating on Morningstar.

If you bought $10k in 2008, you'd have doubled your money on dividends alone by 2014 (without reinvesting them)! That's bananas. Looks like their dividends have tapered off since then but still very good.

HustlerAggie said:

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Tumble Weed said:

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Bought some UDOW at 124.85 and UPRO 71.92 today. Giddy up!

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Today is a good day to buy both.

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If they get rid of the ability for the average investor to buy these stocks, I will be sad. I wish that I would have known about this 5 years ago. This is one of the many reasons that I love the Business & Investing forum. Many topics are discussed that I have not been exposed to.

Next month I will be buying TQQQ.

Tumble Weed said:

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HustlerAggie said:

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Tumble Weed said:

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Bought some UDOW at 124.85 and UPRO 71.92 today. Giddy up!

---

Today is a good day to buy both.

---

If they get rid of the ability for the average investor to buy these stocks, I will be sad. I wish that I would have known about this 5 years ago. This is one of the many reasons that I love the Business & Investing forum. Many topics are discussed that I have not been exposed to.

Next month I will be buying TQQQ.

---

Well, they aren't stocks.

All the leveraged market stuff doing well today. My TECL is up over 8% at the moment and my SOXL is up over 9%. (!)

TMF taking a beating, as would be expected with all the markets doing so well.

Found an interesting resource: https://logical-invest.com/. I'm getting 1 month free right now and checking things out.

They have a host of different strategies with different risk levels, and they make monthly recommendations for rebalancing. They use leveraged ETFs/ETNs in several of their strategies, but two of the strategies are 100% leveraged. Not surprisingly, these are their best strategies in terms of CAGR.

1) "Leveraged Universal Investment Strategy" rotates SPXL, TMF, and UGLD*. Last month, they recommended 50% SPXL 50% UGLD. This month they're at 40% SPXL 20% TMF 40% UGLD.
https://logical-invest.com/app/strategy/uisx3/leveraged-universal-investment-strategy

2) "Maximum Yield Strategy" rotates between ZIV* and TMF. Right now they recommend 50/50.
https://logical-invest.com/app/strategy/myrs/maximum-yield-strategy

*Opinions on ETNs like ZIV and UGLD? Am I wrong to be more wary of ETNs? I wish there was an ETF version of UGLD somewhere... NUGT would be an option but it is more volatile. ZIV seems like a bad idea altogether, but that's because I struggle with the concept of how it's even possible to base funds around VIX.

Edit to add: They recommend allocating a maximum of 15% of your portfolio to one of the above strategies

Here is another paid one (gives free period of 3 months I think?) that I was subscribed to for awhile:

https://www.trendlineprofits.com/the-white-knuckle.html

It trades SPXL, TQQQ, and TMF as its main assets, and then in months of more perceived risk, he brings in EUO, MORL, UUP, or YCS (only one of these and only sometimes).

He also only recommends using a small part (15-20%?) of your overall portfolio to this. He has other strategies as well that are less volatile and don't perform as well.

Also note: With any of these strategies that uses SPXL, you can always sub UPRO for it. They are virtually the same thing.

Stagecoach said:

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Leveraged ETFs belong only in the portfolios of mathematical engineers who possess a deep understanding of the double edge of the sword, and when to use them. They are not suitable for long-term buy and hold, which is why all of the big Wall Street firms have shunned them. They are an arbitration waiting to happen. Too much risk for average (and even most highly experienced) investors to understand. That's why you can only buy them in self-directed accounts where you have nobody to sue when it--inevitably--blows up your so called back-tested model. Just my $0.02

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What it really sounds like is a way for greedy amateurs to screw over the rest of us who have been getting rich slowly our whole lives. As soon as the market corrects, everyone will panic and sell, causing the entire market to crater, with trillions of dollars disappearing instantly, the disappearance of university endowments, 401(k)'s, pension funds, and market cap. I'm just an average dude with a Ph.D. and course work in differential equations, quantum mechanics, and matrix algebra, but darned if I understand what any of you are talking about, so I'm willing to be educated. The main thing is that I'd like to protect myself against the ill-advised machinations of others, if such a thing were possible.

94chem said:

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Stagecoach said:

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Leveraged ETFs belong only in the portfolios of mathematical engineers who possess a deep understanding of the double edge of the sword, and when to use them. They are not suitable for long-term buy and hold, which is why all of the big Wall Street firms have shunned them. They are an arbitration waiting to happen. Too much risk for average (and even most highly experienced) investors to understand. That's why you can only buy them in self-directed accounts where you have nobody to sue when it--inevitably--blows up your so called back-tested model. Just my $0.02

---

What it really sounds like is a way for greedy amateurs to screw over the rest of us who have been getting rich slowly our whole lives. As soon as the market corrects, everyone will panic and sell, causing the entire market to crater, with trillions of dollars disappearing instantly, the disappearance of university endowments, 401(k)'s, pension funds, and market cap. I'm just an average dude with a Ph.D. and course work in differential equations, quantum mechanics, and matrix algebra, but darned if I understand what any of you are talking about, so I'm willing to be educated. The main thing is that I'd like to protect myself against the ill-advised machinations of others, if such a thing were possible.

---

All of the greedy amateurs have some serious coin.

Top 10 Most Traded Leveraged ETFs

1. VelocityShares 3x Inverse Crude Oil ETN ETF
This ETF trades approximately 25 million shares daily.

Those foreign governments need to brush up on their fancy math skills and quit dabbling in things that they cannot understand.

https://www.investopedia.com/articles/investing/020816/top-10-most-traded-leveraged-etfs-uvxy-sds.asp

94chem said:

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What it really sounds like is a way for greedy amateurs to screw over the rest of us who have been getting rich slowly our whole lives.

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Isn't greed the driving force of all investing? (...or any method of making money.)

I was considering selling some out of the money (cashed backed) puts to get into SSO. I would then sell covered calls, they are appealing.

Thank you for starting this thread. I will read the full thing, but be careful backtesting with TMF. It is running out of room (interest rates cant fall much further) to properly hedge your portfolio (likely someone has already pointed this out).

Bought more TQQQ, UPRO, and UDOW today.

Yes they are volatile, but less so than several other Chinese stocks that I have owned.

Sold naked Put for SSO with a strike of 80 expire at 1/21/2022 (deep out of the money). I have some more naked put orders that I am trying to sell at a strike price of 90 same expiration date.

AgBank said:

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Sold naked Put for SSO with a strike of 80 expire at 1/21/2022 (deep out of the money). I have some more naked put orders that I am trying to sell at a strike price of 90 same expiration date.

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I had always read and believed that it's better to do options against non leveraged SPY, QQQ, etc since they're more liquid and that the leveraged gain/loss is basically baked in to the premium prices in the form of more IV.

Tumble Weed said:

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Bought more TQQQ, UPRO, and UDOW today.

Yes they are volatile, but less so than several other Chinese stocks that I have owned.

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Hope you didn't buy much

Tumble Weed said:

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Bought more TQQQ, UPRO, and UDOW today.

Yes they are volatile, but less so than several other Chinese stocks that I have owned.

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Today 2/19/20:

TQQQ - LOD was 116.40.
UPRO - LOD was 79.73.
UDOW - LOD was 133.88.

Giving you LOD, tell me how you are doing?

ebdb_bnb said:

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Tumble Weed said:

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Bought more TQQQ, UPRO, and UDOW today.

Yes they are volatile, but less so than several other Chinese stocks that I have owned.

---

Today 2/19/20:

TQQQ - LOD was 116.40.
UPRO - LOD was 79.73.
UDOW - LOD was 133.88.

Giving you LOD, tell me how you are doing?

---

I was on vacation last week with spotty coverage.

Logged into my TDA account on Tuesday to a bucket full of red. I took all of my stop losses off before I left, and I am glad that I did. I would have cashed out of everything that I own. AAPL, FB, INTC, JD, BABA. Everything.

As of right now, I am

-21.50% TQQQ
-23.18% UPRO
-26.12% UDOW

This stuff isn't for the faint of heart. Right now I am bargain shopping some individual stocks, and not increasing my position in my leveraged ETF holdings.

Hold on to your pantie hose, girls! Let's have some fun.

DEFINITELY not for the faint of heart. You are essentially taking the existing index funds and just ratcheting up the volatility/risk on them. Long term, this is shown to work, but if there is a drop before you have a chance to appreciate much, you are in a world of hurt.

Also, it is more likely to lose everything with these funds if you don't hedge at all. (i.e. my TMF hedge went up as the leveraged-index funds went down last week.)

Time to ultrashort?