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Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives -- Ignore unavailable to you. Want to Upgrade?

To: Gary105 who wrote (23529)	8/14/2011 5:27:44 PM
From: mazel-tov	Read Replies (1) \| Respond to of 219432

As you probably know all the leveraged ETFs' experience some decay which causes the erosion that you highlighted. In fact, a fair amount of research has been done which demonstrates that shorting an equal dollar amount of both sides of a leveraged ETF has a high likelihood of a profitable trade over a period of time. For example, shorting FAS and FAZ or TNA and TZA, etc simultaneously and then holding the short positions for several months will result in a healthy profit over time. Check it out for yourself. The problem with the strategy is two-fold: it is not easy to get the shares to short and some brokerage firms require a minimum amount eg $50K on each side of the transaction and there is often a fee that may have to be paid in order to enable the shares to be available for shorting. Also, while the strategy has a high likelihood of making money, I have read that sometimes anomalies can arise in the pricing of one or both instruments that can cause the trade to go wrong.