SLV...ZSL..AGQ--All losing money today

Ahrensdad

This is according the Yahoo Finance.

SLV 34.22 -0.17 -0.49%
ZSL 20.44 -1.26 -5.81%
AGQ 174.25 -8.35 -4.57%


I didn't think that was possible.

Justacommeman

You are looking at the silver Triple Lindy. MJ

derryb

more sellers than buyers in all cases. The flock is moving to cash on uncertainty of what the market will do next.

JCMhouston

Well, I bought some SLV this morning for $32.66, we'll see where it goes when I close it out the end of the day. So far I'm looking ok.

Also keep in mind those quotes are delayed so when there are big moves (3-4%) in a short period of time the prices shown may not have caught up.

MrBear

I've been too lazy to read the details on how the leveraged ETFs actually maintain their leverage, but it's entirely possible for the numbers to be wonky when silver's close to zero gain, and volume is high.

As I mentioned elsewhere, a few hours ago, AGQ was down 10-12%, while ZSL was up only about 5%...

secondrepublic

Those numbers must be off - maybe some quotes are real time while others are delayed. ZSL should be going the opposite of SLV and AGQ.

I made some money in ZSL today - quick trades - it's dangerous to stay in there too long!

laxmaster92

ZSL and SLV both down. Aren't they supposed to be inversly proportional?

fastrudy

<< <i>ZSL and SLV both down. Aren't they supposed to be inversly proportional? >>



A beautiful theory slain by an ugly fact.

streeter

This correction will hopefully teach a few people to be a little more cautious.


many silver bulls have been remarkably silent recently with their sage hindsight advice

Probably storing up the 'I told you it would recover' and waiting for an opportune time to spew. Silver better turn up or they might get difficult to be around

They might explode from storing up all that 'wisdom'

Say you had a 1000 OZ and silver goes off the cliff from the high 40's to the low 30's...I'd be concerned.

I could have bought a used Ferrari with that loot.

miklia

an excellent lesson to show that whichever way you think silver will go, if you want to play it you should always do it by shorting the 2x inverse. even if you're only moderately wrong and silver (or whatever you're looking at) is flat, if you're playing 3-6 months+ you'll win.

akuracy503

Edited to take out the obvious I would stay away until we get some regularity.

cohodk

Ah, the mathmatical theory of compounding. If you dont undersatnd it, you will fail.

Wingsrule

<< <i>Say you had a 1000 OZ and silver goes off the cliff from the high 40's to the low 30's...I'd be concerned. >>




<< <i>I could have bought a used Ferrari with that loot. >>



$16K for a used Ferrari? Where do I find one?

1000 x ($49-$33) = $16,000

Wingsrule

Barron's is trying to get some answers on this very topic. I can't find the link to the original column posted Thursday.

AGQ / ZSL

Ahrensdad

Well, at least I'm not the only one that saw this and was scratching my head.

ranshdow

I didn't think that was possible.

I think it has to do with the time decay (cost over time) of the options/futures used to generate the leverage over the underlying (spot prices either now or in the future). You're not going to find a leveraged instrument that doesn't incur some sort of cost for that leverage.

NumbersUsacom

An opportune time for those who missed out on this latest run to $50.00, to load up now for the next run to $100.00 + and then eventually to the $260.00-$280.00 range.

Don't be sucked into the all bear mode because of a quick and sharp correction, this is just a (1987 stocks) incident, the higher the prices the greater the volatility.

1987 sparked a lot of panic and bearishness, but it actually was a great time to buy. Likewise it is with silver.

Wingsrule

The conspiracy continues...

Bear

Please do not fight the trend. Conserve your cash, wait for a turn around.

Do not gamble all, on wishful thinking.

miklia

there are a couple of different factors at play that lead both the long and the short to drop. First is decay (esp if the underlying asset is a futures contract like UNG), second is the management fees (which aren't much), but most importantly is the recalibrating. These are (this week aside) designed to correspond to 2x the daily move, and refigured daily. to give an example:

Stock A trades at 100. Ultra U gives 2x long, Ultra Z is 2x short, both have just started at $100 also.

Day 1. stock goes up 25%

A: $125
U: $150
Z: $50

Day 2. stock drops 20%

A: $100
U: $90 ($150 - 40%)
Z: $70 ($50 + 405)

Moves like this are exaggerated here for simplicity's sake, but even small moves add up over time. get big moves like silver's been making, and it decimates the stocks quickly. this is why i recommended buying AGQ puts if you think silver will drop, or ZSL puts if you think silver has more to gain. ZSL will probably do another 5-1 split within a month or two.

there's a guy on motley fool picking stocks that only shorts every 2x or 3x product, both the long and the short. his returns are in the top 0.1% of traders there. i always wanted to try that with real money...

RedTiger

<< <i>there are a couple of different factors at play that lead both the long and the short to drop. First is decay (esp if the underlying asset is a futures contract like UNG), second is the management fees (which aren't much), but most importantly is the recalibrating. These are (this week aside) designed to correspond to 2x the daily move, and refigured daily. to give an example:

Stock A trades at 100. Ultra U gives 2x long, Ultra Z is 2x short, both have just started at $100 also.

Day 1. stock goes up 25%

A: $125
U: $150
Z: $50

Day 2. stock drops 20%

A: $100
U: $90 ($150 - 40%)
Z: $70 ($50 + 405)

Moves like this are exaggerated here for simplicity's sake, but even small moves add up over time. get big moves like silver's been making, and it decimates the stocks quickly. this is why i recommended buying AGQ puts if you think silver will drop, or ZSL puts if you think silver has more to gain. ZSL will probably do another 5-1 split within a month or two.

there's a guy on motley fool picking stocks that only shorts every 2x or 3x product, both the long and the short. his returns are in the top 0.1% of traders there. i always wanted to try that with real money... >>



That's a great option strategy for paper traders or for those trading in a contest on a training program or some such. It might also be a good idea for those playing the ETFs (shorting the opposite leveraged ETF). For real money option traders, the problem is that the AGQ and ZSL options are thinly traded with wide bid/ask spreads. While SLV options might be quoted penny wide or maybe 3 cents wide, a typical 50 cent value ZSL option might be 10 cents wide. A $5 AGQ value option might be a $1 wide. That means it is hard to get fills. Worse, it may be hard to close the position if a person wants out at a specific time or price on the underlying. A real money trader may get a terrible fill with a market order, and may not get any fill with a limit order while the market moves against them.

As to the original post, it is widely known phenomenom for the double and triple leverage products. There is daily friction involved in the strategies that those funds employ that cost them a bit of skin each day. If silver were to make a round trip from $30 to $50 back to $30 in say six months, the double and triple funds will all lose a bit from the friction. While SLV might be back to break even for the buyer at 30, both the AGQ and ZSL holders will have lost money during that round trip. The more volatile the market, the more the daily friction costs the leverage funds.

miklia

I agree - those spreads are a killer on many of the ultras. That said, I have had decent luck getting bids filled over the past month by placing orders smack in the middle of the spread on 'round numbers' (200, 250, etc) - but perhaps I've just gotten lucky because there's been so much more retail interest recently? And also agree that unless the put goes in the money, the spread isn't at all to the buyer's advantage, and even then you might lose out on the last 20% of your gain. While SLV is indeed a better venue for traders short-term, I still think there's 'real money' value in buying puts of ultras on uptrends if you want to hold for a few months - and they're an ok way to get leverage for 'hobby traders' like myself who don't want to risk large sums. if silver finds its expected bottom around 25 this summer, I plan on loading up with ZSL Jan 15 puts in addition to some more physical.

are you a trader by profession Red?

Justacommeman

RT

Your posts are nothing short of excellent. MJ

RedTiger

<< <i>I agree - those spreads are a killer on many of the ultras. ...

are you a trader by profession Red? >>



No, just another small fish in the big ocean.

/edit to add: there was a popular pairs arb trade, shorting both double leveraged ETFs. For silver that would be shorting both ZSL and AGQ. The problem comes with rebalancing every day to maintain a market neutral position. In the long term, it is a winner, but with wide daily swings a person has to watch it carefully to continually rebalance the trade.