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Wednesday, March 18, 2015

Beware Leveraged ETFs: List of Leveraged ETFs for Traders

Here is a list of leveraged ETFs posted by Scott on Silicon Investor
I prefer ETFs that do not use leverage.  If you are day trading 1% of your portfolio into a 3x leveraged ETF, why not use 3% in a lower expense ETF such as DIA , SPY or QQQ?

This graph shows SPY vs. its 2x and 3x ETFs, SPUU and SPXL, respectively.  You can clearly see the slippage and the ratios sure are not 2 and 3x on a YTD chart with two months and eighteen days.

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This graph shows SPY vs. its 2x and 3x ETFs, SPUU and SPXL, respectively on a 5 day scale:

  • Leveraged ETFs get leverage at a very high price so they can lose money in a flat market. 
  • I DO NOT RECOMMEND holding them overnight.
  • Leveraged ETFs are really only for day traders who believe they can make enough from market timing to offset the high expenses.

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