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/biz/ - Business & Finance

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24343072 No.24343072 [Reply] [Original]

No one will answer me on /smg/ why is a leveraged etf bad? On the chart it’s just slowly going up over the years. I bought in it with no idea and 20%+ up in a few weeks

>> No.24343103

It’s not.

If it’s volatile then don’t as the margin call will happen and you will be forced to take losses.

>> No.24343149

>>24343103
>leveraged ETF
>margin call

>> No.24343173

it's not bad desu. it's like a normal CFD position but Ur position won't close. the leverage is reset daily. so if it starts tanking. it might take a long time for it to recover, what I mean by this is let's say u buy AMD leveraged etp for X amount. amd drops 10% a day for 5 days. even when amd gets back to X price you still won't be break even. and will need amd to reach like X and a 1/4.

so use them mainly for days of volatility because otherwise you might be bag holding for a long ass time

>speaking from own experience with them
>UK fag who has 51 AMD 2x Leverage ETP

>> No.24343186

>>24343072
In the short-medium term, they can suffer pretty big losses. But over a long enough timeframe, 3x ETFs destroy their non-leveraged counterparts. You just need iron hands and balls of steel.
Stick with S&P Dow and NASDAQ based ETFs, more niche ones do carry real risk of decay.

>> No.24343235
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24343235

Rise the hell up INAQ CHADS

>> No.24343241

>>24343173
https://www.bloomberg.com/quote/2AMD:LN
the etp Ive been bag holding since August.

Tbh u said etf. if Ur buying on actual leverage so borrowing from the broker then yes it dangerous. your position can get wiped out by volatility.

however u can buy etps which track like 2x ETFs etc without the issue of margin call

>> No.24343296

>>24343173
So it’s a way for Jews to steal money from degenerate gamblers? Or it costs then more money to run a leveraged stock and its only meant for pros?

>> No.24343331

>>24343241
don't listen to a thing this mouthbreathing retard says OP
when you buy a 3x etf you aren't 'buying on actual leverage', you can't lose more than you put in

>> No.24343747

It depends.
The primary issues with leveraged ETFs is decay and higher volatility.
Over time, leveraged ETFs naturally tend lower if they do not go up enough to counteract rebalancing and expenses.
They also lose more when stocks go down.
If we start at 100%, lose 10% then gain 10% this is the result:
Normal ETF: 100% -> 90% -> 99%
3x Leveraged: 100% -> 70% -> 91%

Generally they are used to take advantage of bull cycles or hedge. Historically though, popular leveraged ETFs have simply performed better than the market.
Make of that what you will.

>> No.24343875

>>24343072
The problem with any leveraged ETF is that when the underlying asset drops 10%, your leveraged fund drops 20%. The next day when the underlying asset returns to the exact same price as on the first day, your leveraged fund is now only at 98% of what it was the first day.

So over time any volatility will serve to drain your money into nowhereness. It never works in your favor. That's just how the math works out.

If you're up 20%, then you bought at a great time. Now get out before the volatility erodes your gains into nothing.

Try the math out for yourself.

t. learned this the hard way

>> No.24343942

best thread on/biz/, thanks to all who contributed

>> No.24344440

3x is best in v shaped recovery, that already happened, 1x is best for major crab environment, 2x is best for general growth. 2x is def best way to go. there was a study done. and it looks like during v shaped 3x obviously did best but now its crabbing hard. its intuitive if you think about it

>> No.24344481

>>24343072
I asked this question like three days ago nigga.

>> No.24344489

>>24343747
generally speaking, leveraged etfs are best daily to monthly holds, capitalizing on short term drives in the market or a particular sector

>> No.24344534

I love them, but you have to be ready to sell if the market take a major tank like it did in March. Not fucking hard to see warning signs for that. I was in UPRO when March hit and got out mostly around $60, rebought at $30.

>> No.24344571

>Market goes down 33% then goes up 100%
>Normal investors happy that they're up 33%
>You get fucked by the 33% downwards move and you don't get anything from it going up 100%.

>> No.24344593

>>24344571
forgot to mention that you invested in a 3x etf so you're down 100% after the index goes down 33%