FAZ FAS reverse split

[Dforkus]

http://www.etfguide.com/news/571/Direxion-Reverse-Splits-Two-Financial-ETFs/

What this article doesn't tell you is why. Because both of them were having a heck of a time actually reflecting the indexes they were supposed to reflect at the leverage level advertised.. Engineering this 3X hocus-pocus is more expensive than advertised

 

[Jordan]

Besides that, all leveraged ETFs will eventually go to zero.

Short 'em, make bank.

 

[Dforkus]

Besides that, all leveraged ETFs will eventually go to zero.

Short 'em, make bank.

So you'd short, a shorted ETF? How would that be any better than just going long? Except that is, for paying all of the fee's associated with shorting a stock, essentially twice.

Just like the odds laid by a bookie, "leverage" isn't free, and thats why both the 3X Long fund, AND the 3X short fund ultimately can't keep up with their underlying indexes. The money changers need to get payed too...

 

[tmosley]

So you'd short, a shorted ETF? How would that be any better than just going long? Except that is, for paying all of the fee's associated with shorting a stock, essentially twice.

Just like the odds laid by a bookie, "leverage" isn't free, and thats why both the 3X Long fund, AND the 3X short fund ultimately can't keep up with their underlying indexes. The money changers need to get payed too...

You're making money off of the fees, which are quite high. By shorting both the short and the longs, you pick up the same paycheck as the fund managers, which is significant, in that it has driven both the long and short funds almost down to zero from the two hundreds.

 

[Dforkus]

you're making money off of the fees, which are quite high. By shorting both the short and the longs, you pick up the same paycheck as the fund managers, which is significant, in that it has driven both the long and short funds almost down to zero from the two hundreds.

Did you do this? I'd be interested to see if/how, between brokerage fees relating to shorting the position, and the internal fees worked into the price of the fund; the math actually works out.
I'd be interested to see if after the dust settles something like this would work..
Not interested enough to actually try it, I am a conservative long-only investor, with the occasional non-levered short as a lark...

 

[tmosley]

No, I didn't, though I am thinking about it. I would probably just short FAS, in order to get the power of FAZ, minus the fee loss. I don't know what the costs on it would be over the course of a few months, but given that FAS fell to 1/4th, and FAZ fell to 1/20th of their respective peak prices over that term, it's pretty well guaranteed to pay off, even with high fees.

 

[loudes13]

Typically I short them based on what the market will do. Wished I shorted FAZ today :-(

 

[Dforkus]

Typically I short them based on what the market will do. Wished I shorted FAZ today

? Why would you do that when you could have just done a traditional buy and sell of the long fund.. much cheaper although still, not truly 3X