Quote:
Originally Posted by Frequitude
Interesting, didn't know that Slava. So if I buy HOU or whatever the 2x is and oil goes from $30 to $50 in a volatile fashion then $50 to $30 in a volatile fashion I might end up losing? Is there the same probability that I end up winning still (i.e. is the math symetrical)?
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Well the issue is that every day starts at "zero". So the most glaring example goes back to people using these leveraged ETFs for gold in 2008-09. Gold was relatively flat, I think only down like 2% or something over the year...so not a big deal. But both the leverage up and leverage down mandates lost money because of the volatility. They're quite path dependent if that makes sense.
There are actually a number of dealers (investment dealers) who won't allow their use because they're quite misunderstood. The other thing to consider is that the average holding time for these mandates is something like 3 days.