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These Are Not The ETFs You Are Looking For...But This IS A Margin Call
Presenting, with little comment but complete and utter bewilderment, the latest margin hike and ETF changes. Direxion ETFs just changed the 'fund' mandates from 2x to 3x on a number of their more popular products - which of course, given the extra vol, will mean significant margin hikes from any broker you trade with...curiouser and curiouser.
(h/t DS)
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Sweet! more 3X options. I thought they were loosing their edge with this waste-of-time 2X ETFs.
There's a new 3X silver play - I forget the ticker though...
3X ETF for everyone! Why? Because there just isn't enough volatility in the market to make a descent buck. /sarc
I'm waiting for the 4x ETFs.
You can get 10X on craps in Vegas, why not a 10x ETF?
Margin those babies and you're really a player.
AND.. you should get free drinks with cheap well booze.
I'm holding out for the (free/included) Gatorblades. That's Everclear and Gatorade.
i'd like to offer a call back and a shout out to the descent buck mentioned above. i think that just may be an idea whose time has come.
Holy fuck, those sound deadly!
USLV (Bull)
DSLV (Bear)
UGLD (Gold Bull)
DGLD (Gold Bear)
Not much volume yet, but maybe will be a good play in the future.
Silver: Bull-AGQ Bear-ZSL
I love these back & forth.
Most brokers want 100%.....anywhooooo
I saw NUGT going the wrong way today and put in on my list of things to try to figure out. When was this public knowledge? I am pretty fed up with seeing things making their whole move before they are offloaded on the "news".
Totally insane!!
Oh the humanity. Can I say it - what liquidity problem?
grip it and rip it. Direxion wants you to ride the wave!
As a random sidebar: My friends and I convinced a direxion sales rep that we ran a hedge fund once and got him to deliver a box of logo embroidered shirts to my friends college apartment...although to this day i've never seen the shirts - so far all I know, he's Lying. Oh well at least I bought the PHYS today.
You can say that again!
grip it and rip it. Direxion wants you to ride the wave!
As a random sidebar: My friends and I convinced a direxion sales rep that we ran a hedge fund once and got him to deliver a box of logo embroidered shirts to my friends college apartment...although to this day i've never seen the shirts - so far all I know, he's Lying. Oh well at least I bought the PHYS today.
Sure why not.
I want someone to 2x leverage FAZ already. I'll buy that shit up.
Lol. That shit would be crazy. 25% swings every day. Then just buy some way out of the money call options and wait for the market crash. You'd only have to get it right once and then you could retire to a nice and quiet island nation.
That is Nassim Taleb's strategy, buy way out of the money options because they are usually underpriced in the long run.
Tails are so phat, allegedly.
Um... even I won't touch double-charged FAZ. And I love FAZ.. but if there was ever such thing as a double-charged FAZ, I mind as well just bet on black or red. The hits are just too powerful to sustain at that level..
Id be very surprised if we see anything higher than the current 3x leverage going on in ETFs. A 4x vehicle would mean a 25% abnormal move (very possible considering the state of the markets) would totally wipe out one of the ETFs -- its quite a hassle the issuers (iShares, Powershares, etc etc) dont want to deal with. I love how people sometimes here write they've 'loaded up' one of these and sit on the 3x ETF for ages, not understanding theyre paying fees DAILY as well as having to deal with rebalancing which more often than not goes against the long in that etf.
@ZeroPower
"A 4x vehicle would mean a 25% abnormal move (very possible considering the state of the markets) would totally wipe out one of the ETFs"
Umm, no, it doesn't exactly work that way. Here's some information on the actual working of a leveraged ETF: http://tradingsim.com/blog/leveraged-etf/
lol..thanks for blog link. All it does is provide a simplistic example of decay, nothing at all i was referencing to.
I was on a structured desk before so am quite aware of the intricacies involved. While simplisitic of an explanation, due to the nature of the swaps (for synthetic issuers - which is more often the case now as opposed to 'old school' physical ETFs) my comment stands.
Oh, your a trader. That explains a lot.
Bingo. The decay is faster for 3x vs 2x ETF's. That means the issuers get richer faster churning them on a daily basis. Sigh, the things are only useful for minute by minute trades. Holiding them any longer is risky. Holding them overnight is a 50/50 proposition. You could easily make 5% or lose it depending on the mood of the gods.
Not a problem...provided your not using margin. The other factors remain.
Interesting, very interesting. Hummm...
UBS delta desk is ALL OVER this.
I can't wait for the 40x and 100x ETF's so I can play like the big boys.
Can I put that on credit? /sarc
What happens to options already purchased against these ETFs? hmm
OCC posted a message saying that they would not change the options contracts. Thus if you sold vol you are SOL and if you are long it you just got a windfall.
This is very much like the porn star phenomenon, where ifirst you were not hardcoreunless you got DP'd. Then hardcore became double vag. Now you are just a rookie if you don't do double anal. Dub Vag, Dub anal and two in the mouth is just a few years away.
On a related note, why is that in the NFL a 50 yrd field goal is the new 40 yrd field goal? Has kicking technology changed that much?
Steroids. Or global warming. One of those.
Completely OT, but "A Going Concern" is definitely my favorite episode of Archer thus far.
Cheryl: You said you had a plan!
Archer: My plan is to crowdsource a plan!
Cheryl: Thanks, Noam Chomsky!
DVDA!
Jesus christ man. Didn't you know that shit warps YOUR brain too?
Before you know it you won't be able to have an orgasm unless you have both fists in a girls ass while she's licking dog shit off of a penn state graduates open skull and you're kneeing her. Literally kneeing her vagina. Imagine that shit.
You should really calm down with that stuff.
maybe you're right, because that sounds pretty hot to me.
I'd call that movie "the Ass-fistocrats"
that is the funnest sickest shit i have read all year, you two make a great double act
I'm convinced this really isn't the best site to show my young son to teach him about financial markets and investing.
Don't be fatuous, Jeffrey.
What convinced you? Was it the bare-knuckle ass fucking or the DVDA?
No, it was the 4X Quad penetration that sent me over the top. I've not seen that one. Is that even possible? Must have some mechanical device to make it fit, or maybe a fat chick could do it- like a 4x 100lb.
It's a bit from the movie "Orgazmo"
http://www.imdb.com/title/tt0124819/quotes?qt0309387
The nekkid avatars were also a clue :)
They used to play football outdoors.
except for that doosh that kicks for the Jets
2 girls, 1 cup is now 3 girls, 1 cup.
Come on, we have the mostest honestest roulette wheel in all the west.
And we are so broke we need you to gamble with us. Suckers.
Look, to make it all worthwhile, you have to be able to put in £1000 and reap £700,000.
FOUL.
Illegal use of a media ambush on a hedge fund manager during an extra point attempt for a goal you don't really have.
15 yard penalty. Don't repeat the clowns.
Arbitre! Two minutes for high sticking during a badminton match.
Lots of valves going in every where.
I remember a game we played as kids, we called it Red Light Green Light. Was a dumb game, but we played it.
I love the fear induced increase in risk.........
Bring it on.......
Like playing backgammon, with 4 guys of my guys covering 2 spots in the opponents home court, and he brings out the doubling cube...
Bring it on...
back in the days when we were all unemployed in the hood (1980ish) one of the ways we stay out of trouble was playing a game called Hot Beans. So one kid hides a leather belt and then yells ready! The rest of us come off the base searching for the hidden belt. Who ever finds it yells HOT BEANS!! and starts commencing to whipping asses who's ever closest before they get back to base safely. If you slipped and fell.. well you took that ass whipping but for everyone else watching it was shit your pants funny.
Great game for stoking the adrenalin rush without resorting to stealing cars and climbing cliffs and all that other sort of shit we did anyway. Those were the days. I'm curious though, anyone else heard of it or was that just something exclusive to my twisted neighborhood ?
Once upon a time (before anyone said "Back in the day"), we used a paddle and yelled "Hot Butter Blue Beans". Almost as much fun as hand ball and "A's up".
I still have fond memories of some real sore butts.
We called it Hide-the-Belt in E. Germantown in NW Philly but I don't remember having to yell anything when you found it-you just started whipping.
NUGT is the shit. Buy some cheap ass short term out of the money calls after each gold drop/takedown, and sell for 100% profit a week or two later. Do the inverse with DUST. But do yourself a favor and don't put a significant part of your portfolio in this.
Putting margin on these ETFs is insane. But f*** paper ETFs. Especially in the environment. I have TMV that I used to trade. But I got stuck holding the bag. F*** this govt for manipulating the yield curve.
libertarian86.blogspot.com
Just like when Gillette went from 2 blades to 3 blades.
You're a bit behind there.
Gillette now has 16 blades.
"The new Triple-Trac III™, because you'll believe anything!" -- SNL fake commercial
don't forget people, the HFT's scan all trading accounts, and run right thru your stops!
The livestock are being harvested. This whole week has been a margin call on fiat currencies. The squeeze is on.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
Next step, the X3 will be replaced by X5.
The ultimate objective no doubt will be to achive 40:1 leverage ala MF*!
Ok lets study the conspiracy for evidence.
If the rulemaking bodies have a pattern of rules that improve liquidity in paper markets such as stocks and bonds, but in contrast have a pattern of rules that withdraws liquidity from commodity markets, then there is a conspiracy.
This could likely be proven not a coincidence, and any paper written analyzing this would be published in a prestigous journal, the info being totally explosive if true.
On a long enough timeline, everybody loses with leveraged ETFs. Increasing the leverage, shortens the timeline until everybody loses.
If you could short leveraged ETFs, you'd be rich beyond you're wildest dreams....but you can't because there's never ever shortable shares for schmucks like us.
Why? Because your broker is shorting all the shares himself. Which means he's selling ever share of every leveraged ETF TWICE.
This "strategy" has been paying off nicely for your broker, but it doesn't stop with leveraged ETFs, your broker can sell the same shares of any ETF he chooses twice legally. Including PM ETFs. Which means that SLV shares are actually 48.75% backed by silver, not 97.5% as Blackrock claims, but I digress.
The important thing is that methods of seperating you from your cash keep improving. So far so good.
You'll continue to see these +3% -3% moves in stocks too.
Here's why:
Example
Start: 3x ETF=100
Day 1: Underlying moves 3%, 3x ETF moves 9%. (=109)
Day 2: Underlying moves -2.99%, erasing yesterday's gains, 3x ETF moves (.0299*3) -8.97% (109*.9103)
Finish: 3x ETF= 99.22
Congratulations on losing 0.77% (plus fund expenses and trading fees), in a completely flat market, genius.
Why would they ever want it to stop?
Is the why silver and gold dipped Thursday?
Gold and stocks keep the current ratio (just under 7) and trade down together? Or do we get stocks down with gold steady to higher?
http://2.bp.blogspot.com/_sy2qqBjcPIg/SJcVGLmMnGI/AAAAAAAAAr0/k6OBCsZuL1o/s1600-h/DOW-Gold+Ratio1800+to+Now.php
This is a day late and a few times leverage short. If they put 20x leverage on 'em, they'd be called a bank.
Do these ETF's come with free suicide vests?