Have you back-tested the impacts of a sustained market downturn on leveraged ETF's and did you read FINRA's recent comments about access?
FYI - one of my posts from a few months ago, about the 3x ETFs. The 2x are obviously less risky:
I don't know the "correct" timing, but I know the "better" timing and rely on the historic principle that stuff goes up (in general). LOL! I also calculated a few scenarios to test the long hold theory using Morningstar's $10k return chart. If you bought at the absolute worst time over the past 10 years, here is what happened:
2/19/20 - $10,000
3/20/20 - $3,003 (so you lost 70% at bottom)
11/19/22 - $30,002 (so 3x at the ATH peak even if you bought at the worst time possible)
Held until today - you still would have about $15,000
I tested a few other extremely negative scenarios and it worked out fine. The only time that it didn't work out was during the full dot.com and 9/11 crash when the QQQ dumped 85%. That compression of the daily 3x was too strong to survive. You still would not have made your money back today if you bought literally at the dot.com zenith. That's the only scenario where this plan turned out to be a loser.
You probably know this already, but for others reading the post, the math is actually in your favor. Since it 3x's daily, you get a significant multiplier affect beyond just the 3x on the upswing. If the QQQ goes up 20% over 6 months, the TQQQ doesn't go up 60%, but actually much higher. On the flip side, since 0% is the mathematical floor, it works in reverse going down. So a 20% drop in QQQ is only about -50% or so for the TQQQ.
As I mentioned before, I am VERY comfortable with holding onto UPRO for the long haul. I am still thinking about TQQQ. As for SOXL, this is even more nuts that TQQQ. I have already experienced multiple +/- 15% days. I only own $5k of SOXL and may convert to the 2x version or perhaps short term play it.
Interesting stuff! I learned a lot over the past few months on these leveraged funds. :)
www.reuters.com
