Gary,
RE: My analysis looking at USPIX between two specific dates shows a big deficiency:
QQQ: 2/4 and 5/22 values: 97.1562; 81.625
(down 16%)
USPIX: 2/4 and 5/22 values: 38.74, 41.44
(up 7%)
The deficiency in USPIX tracking 2x QQQ is basically mathematical. I trade USPIX at short term peaks, and USPIX almost always tracks 2x QQQ on a DAILY basis. But for a longer term hold, USPIX , because it is a 2x fund, can provide lousier returns, because of the volatility.
Because QQQ peaked after 2/4, thereby diminishing the size of one's portfolio, before declining, the return did not match up. It is the same as what will happen if you lose 50% of your investment, you need to make 100% back just to break even. Because the QQQ peaked first between 2/4 and 3/27, one's investment in USPIX went down by 36%. One needs at that point to make 56% on remaining capital just to break even. USPIX from 3/27 to 5/22 did go up 68%, but since it was on a reduced investment base (64% of original capital), the overall return was lousy compared to what would have happened if one had just shorted QQQ. By the way, the RYDEX Arktos Fund (1.0 beta I believe) also underperformed QQQ during that period, but again, this is because of the trade going bad at first.
These funds can be dangerous as buy and hold hedges if not opened at the right time, but these kind of funds are the only way I am aware of to play the market short in an IRA account.
My point here simply is that USPIX does perform inversely to 2x QQQ on a DAILY basis. Please note that there is an occasional minor deviation, and I believe this will be caused by gains/losses in the Nasdaq 100 futures between 4 pm and settlement time which are usually reflected in QQQ but not reflected in NDX which is quoted at 4 pm close.
David |
