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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Bread Upon The Water who wrote (3970)	3/2/2010 11:20:30 AM
From: Wowzer	1 Recommendation Read Replies (3) \| Respond to of 34328

As of today, if the XLF (which is the inverse of SKF) were to drop to it 52 week low of 5.88 a 60% decline. XLF 60% drop would only push SKF to 49.08 (2x inverse) and that is the best case scenario where if it were to drop that much in one day. SKF will never see 268 again unless it does some type of reverse split. Mathematically these are horrible investments for anything other then a day trade. For example on how this works mathematically, lets say both XLF and SKF are trading at 100. Day one XLF drops 10% to 90, oh ya SKF goes to 120 all is well. But on day 2 market changes it mind (whatever we were afraid of yesterday didn't happen) and XLF goes back to 100 a 11.11% increase, SKF which follows 2x daily movement on XLF, drops 22.22% from 120 or drops to 93.34. That is now the new baseline for the next days action. And you just lost 7 bucks never to be regained, even though XLF is just back to where it was when you started an SKF position. Furthermore, this is before the fees are added in. As I have stated many times before holding these inverse ETF longer then a day, you are guaranteed to lose money unless you are a perfect market timer. They are absolutely horrible hedges and a huge scam.