Gersh,
Time decay of options is not a factor in USPIX. It is simple math. You simply have to time the investment perfectly to the move to get the 2x return. Otherwise, it just won't happen, it is math. I wish I could explain it better, but I can't. But to get a better feel for what I am saying, take a ten day period where NDX goes down 1%, then up 1% five times over the ten days. After the ten days, NDX has gone down .05%. Since USPIX is 2x NDX, USPIX will go up 2%, then down 2% for five times during this period. USPIX will actually have gone down by .2%, even though NDX was down.
The point I am simply trying to make, is that with a 2x fund, timing is EVERYTHING. The best trades hit a top, the first day the index goes down and continues down in a relatively straight line, and the trade is closed before the index has made any kind of significant up move.
I would also note that on the day one plans to close the trade, a hedge of a QQQ long position for twice the amount of the USPIX initial short position will protect the gain, as long as NDX does not gap up.
Dollar cost averaging will only be as effective as the timing of the averaging in. The best trades will tend to be short term trades, longer holds will underperform the 2x NDX inverse unless the decline is relatively straight line.
David |
