Hey /biz/.
I currently have 10k invested in S&P 500 ETF, but I was wondering, isn't it better to invest those in a 3x bull S&P 500 ETF ?
Why not ?
I'm in for the long term. Wouldn't it be more profitable ?
What would it take for me to lose everything, -100% of the said ETF or -100% on the S&P ?
Let's say S&P loses 10%, I'll lose 30%, right?
I can assume that risk, would BTFD.
Thank you.
>>1013307
What I don't understand is, let's say if I bought SPXL at 25, as of today I would be profitable over the long term, right ?
>>1013309
Leveraged ETFs experience decay, i think.
So, if the s&p stagnated for a while your ETF would just go down. The only way you would experience long term gains is if the S&P was in a consistent uptrend.
Leveraged ETFs are not traditionally used for long term investing. They're more for swing trading or even intra day trading.
>>1013314
"So, if the s&p stagnated for a while your ETF would just go down. The only way you would experience long term gains is if the S&P was in a consistent uptrend. "
Isn't it an opportunity to buy more considering SP is heading for 2700, 3000?
>>1013314
The thing is, when SP will reach 3000, I would have earn 5k$, great but not that promising when you think SP went up 1000 points.
Treat a leveraged etf like buying on margin. If your etf goes up, you keep all the profit. If your etf goes down, you have to sell into a loss. It's unintuitve but follow me here. You want to maintain a constant leverage like the underlying fund. If your etf goes down, your leverage ratio actually increased. Say you bought a stock with 2x leverage (1x from your own money and another 1x borrowed), $100 + $100. Your stock experiences a loss, which will reduce your equity (value minus borrowed), $80 + $100. Your new leverage is now 180/80 = 2.25. You are now borrowing too much money and need to sell some stocks. To play the long game on a leveraged etf, you must constantly rebalance, preferably every day, week, or when your leverage drifts too far from the original ratio.
>>1013314
This is the only correct answer itt
>>1013387
They experience decay because people don't rebalance. It's no more dangerous than buying on margin.
your returns in a leveraged position will be reduced proportional to the volatility of the underlying asset times the square of your leverage ratio. s&p 500 isn't very volatile so you won't see it often but it can happen that the underlying asset goes up a modest amount over the course of a few months but due to volatility the leveraged vehicle goes down.
also typically leveraged etfs have higher expense ratios, but in many cases they're still reasonable
>>1013385
only if anon wants a different leverage ratio than 300%; because the etf will automatically rebalance to 300% every day
i dont even consider buying any instrument with less than 200% leverage. i have quite a bit stuff with 10-25x leverages too. most of them work well on monthly basis too. 2x daily etf you can hold 100 years no probs they are so cheap and easy to maintain nowadays. when you go much over 500 with etf's it's harder for the the instrument seller to maintain the daily leverage and you lose some edge long term
>>1013385
that's completely wrong. you are now talking about unlimited long turbos or something.
most etfs are daily. there are some that are monthly basis too.
The decay leveraged etfs is gets worse the longer it's held.
Don't take my word for it try Google and you will find alot of well put together examples.
Also remember that leveraged etf looses value with leverage too. Remember back in August when the sp500 shed 12 percent of its value in 2 days? Someone holding a 4x etf saw balances drop by almost 50 percent. Not this was temporary, but if your going to fuck with leverage you need to have the disipline deal with that kind of volitility
>>1013734
Yeah....right. That's what the idiots tell you. The thing is liquidity is so good it's insanely cheap to maintain 2-3x leverages nowadays any stock or commodity. Leverage works both ways for dailys.
Sp500 5 years 63% return
for example
sp500 direxion 3x daily 270% return
