Big Dog's Boom Boom Room Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: buckbldr who wrote (124635)	10/5/2009 11:19:29 PM
From: edward miller	Read Replies (1) of 206118

Unless you are still an active trader who can make money trading daily or weekly swings I would stay away. These leveraged investment vehicles all get leverage through investments that have time value loss. No expiration date just means that you can keep losing lots of money if you are on wrong side. You can lose money much faster than you can win money. Let me show you the leveraged vehicle based on XLF. These are FAS and FAZ, and they started trading near the beginning of November 2008. First look at the chart of XLF over the same time period: stockcharts.com Note that XLF opened at 14.62 on the first day of trading for FAS and FAZ, dropping to 5.80 at the March low and rising to today's close of 14.74. Compare with the results for FAS and FAZ. Next is FAS, the 3X bullish ETF: stockcharts.com Note how from a start of 276.57 it dropped all the way down to 11.56 in March and has recovered only to 74.14. That is only 27% of its value at the beginning of trading while XLF is about even. So the bullish 3X ETF has lost over 70% of its value in less than one year. Now look at FAZ, especially how it did as an investment when XLF crashed from 14.74 to 5.80: stockcharts.com FAZ started trading at 602.20, then peaked at over 2000 intraday in late November but only reached 1155 at the March bottom, only ~92% gain from the start of trading. The better trade would have been to short XLF for 154% profit. It is supposed to be 3X leverage. What happened? Time shrinkage. These vehicles are only good for short term trades, not investments. Don't overlook the losses when you are wrong. While XLF rose from 5.80 at the March bottom to 14.74 today, FAZ has been wiped out! Down from 1155.00 to 21.30 at today's close is a 98.2% loss. Of course the effects are amplified for 3X leverage versus 2X leverage, but I would argue that only means you lose money a little slower - but you will lose money on average unless you are a great trader.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next