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Just FYI: VXX finished up while the VIX finished down. Usually this is bad...
Bad for longs or bad for shorts?
Dunno the stats on that one, J, but what I do know is this:1.) Fear is very high right now... The volume of searches for the phrase 'Bank Run' has just hit an all-time high - higher now than even during the peak of the Lehman Brothers 'moment'.2.) If the YM holds over 12500 through the open tomorrow, I would expect a rally lasting 3+ days and the gap up open tomorrow will not fade until after then. I'd expect a gap-n-go day, to boot!3.) I picked up some more TNA today. The mkt is wound up tight here, and I am betting the resolution will be to the upside.... "explosively" would be nice, but not required.4.) As stated the other day, a move over YM 12550 tomorrow should set off a ton of short-stop squeezes and pain for the newbies.BOTTOM LINE: Mkt's just consolidating here.. winding up....All that's required here is patience.
$SPY $TZA $TNA Hey, what's with all the U-turns? can't get anywhere like this! yesterday, today... back to where we started 48 hrs ago.
My allocation now TNA 20%, TZA 40%, Cash 40%
David, what's the point of holding both TNA and TZA positions (unless you are short one)? What you are doing is the same as TZA 20%, but you use 60% of your account to hold a net 20% position. You may as well dump the TNA and half your TZA, and then you get interest on that other 40%, at least.
Since market direction is unknowable, the idea is to sell whichever gains about 3% first. In a choppy market like this, it may be a valid strategy.
Well, for starters, both ETFs bleed... so, have doubled your bleed since you hold 'em both long, so, it's actually worse (in that regard) than just doing the 20% TZA position.But what you're suggesting is no different than having a 20% TZA position on and then (1) if the mkt goes up 3%, you then put on another 20% TZA to then be 40% TZA, or (2) if the mkt goes down 3%, you then put on 20% TNA, taking your profits on TZA. It's just that your way uses more commissions and ties up more capital, which costs you interest.If you think what you're doing is a "hedge" you need to look into valid hedging strategies. For example, you are obviously bearish, so buy TZA but then sell calls against it. That way, if the mkt chops around or rises, at least you collect the time decay, which offsets your cost basis.
BTW... if I were to do what you suggest, I would invert it and balance it ..., that is, short (not long) both. In fact, a study came out recently where you were suppose to short equal amounts of opposing 3x leveraged funds (I think it was TNA and TZA, in fact), on Jan 2 each year, and then re-balance the following year. The gain was something (theoretically) outstanding, like 70%/year, just because the products bleed so bad. The problem with the strategy is that (and I can guarantee you this) you WILL get your short TNA pulled from you before there is a serious market correction. That's the problem with shorting. You need a very good broker who will tell those scumbags "If you call-in my short now, I'll cut yer nutz off"... And no e-Broker will do that for you.
Very interesting, JKH. Here's an article that discusses this strategy: http://seekingalpha.com/article/298033-one-way-to-profit-with-leveraged-etfs.It seems to me that even if one of the pair were called back periodicallly, the idea could still be profitable. If your TNA were called back then you could cover your TZA and then short both when shares were available again (IB almost always has shares of both to short). What are your thoughts on this approach?
Another idea, JKH: buy deep in the money put options on both TNA and TZA. Thoughts?
Algyros, I'm not a fan of buying options -- I'd always rather be the seller. So, sell calls. But, honestly, I wouldn't do that. I'd simply sell the other half of the trade and then go short the futures (YM ES or TF -- it don't matter, if one drops they will all drop). No one can take futs shorts away from you, they have great commissions ($2 to move $50k worth), very tight spreads, high liquidity, trade nearly around the clock, have AWESOME tax treatment (Section 1256), capital-loss carry-back rules, etc. Futures (for some things) just rock.
Thanks for the good commentary guys. I need to look into futs.
Everyone does... esp for a system like yours that gives signals right near the close. Futs are only closed 4-4:15pm, and are still sufficiently liquid in A/H for everyone but the largest guys (ie nobody here).My only caveat to futures (here) is that I get the feeling we have a lot of tiny account holders here (ie <$100k). And that makes it tough. A single YM e-mini (the "mini", mind you) is worth $50k. So, if you want 2:1 leverage and want the ability to take on a first and a second half position, then you need at least a $50k account. Buying 2 YM futs in a $50k account is 2:1 leveraged. Going over that level of leverage is asking for trouble. Most newbies blow-out 2 or 3 futures accounts before they realize the value in what I just said. Traders here need to realize this is a marathon, not a sprint. So, they need to tone-down the leverage to their accounts. As some are feeling now, no system is perfect, and, if you want to survive, you have to plan for the "worst case" scenario. The key is to survive -- and most will blow out within 2 years. "Survival" in my experience is when you have done this for a decade. I've seen many, many people blow-out.. it's never pretty.