Yeah I see your point. But, I bought $10k of SSO yesterday. It’ll be my first ever “long-term” investment. Whatever that means. I’m still scared to be risk-on over the weekend during these times.
Why does the relationship break down with higher leverage? Why doesn’t a 4x follow the underlying 4:1 ?
I just looked at options on SPY. You can collect $1,400.00 per contract if you sell an at the money call.
Holy ■■■■ lol. That’s so much money.
im not sure im looking into it. last few days the 2x and 3x funds dont return 2x and 3x the index.
If that’s the case, pair it with TLT.
cuz it uses leverage and derivatives. it wont follow it exactly. premiums interest, etc. esp when ■■■■ blows up.
Nery isn’t close.
It is the volatility impact. The impact of volatility is not linear, so as you increase from 2x to 3x you have a linear increase in leverage but a non linear increase in the impact of volatility. So it depends if the expected return from leverage offsets the volatility drag.
The reason why I’m looking into 3x now is the expected return of the market at these valuations has increased.
The impact of volatility is not linear, so as you increase from 2x to 3x you have a linear increase in leverage but a non linear increase in the impact of volatility.
Thanks! I’ve read about this effect but didn’t realize it increases with the leverage factor. So basically the value of a leveraged ETF “melts” a) the higher the leverage factor b) the more volatility there is. Correct if I’m wrong. Tanks!
please explain why qqq vs tqqq returns not close to 1:3 leverage this week. tanks
Looks like Ohai is wrong. I bought 125 shares of SSO yesterday, and I’m down almost $900 today.
LoL. What gives eh?
Technically I said especially when ■■■■ blows up. That is tantamount to volatility.
Not sure I know what melts means, but it means the hurdle rate for returns is higher. As you increase leverage, the breakeven return needed to make the strategy at least match the regular index
increases. Over long time periods, sometimes 3x works out better. But even in these situations, 2x is still better than 1x. While there are many situations where 2x works and 3x doesn’t.
And nery it has nothing to do with interest or premiums. But yes it has to do with volatility.
I suspect he’s actually having to work with all this volatility.
Yeah I understood nothing but I understood that I understand nothing. That’s a start at least.
I hope he’s well. Probably took a private jet out of town and hunkering down till the virus blows over or kills us all.
Let’s pray that that’s the case. We need strong leaders and something to look up to once this nightmare is over. #MAGA #PrayForDonald #PrayForOhai
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I mean you can spend at least a minute. Hell I literally put af next to my outlook screen