hcgdavis 6:33 am on Wednesday, December 5, 2018

Maybe the leveraged products are…

Maybe the leveraged products are not so good for options. We definitely saw that with SVXY. TT has done some new research.

Obviously the advantage is a lot of them are priced lower than SPY so can use in smaller accounts.

https://www.tastytrade.com/tt/shows/market-measures/episodes/trading-options-on-leveraged-etfs-11-26-2018

Also, finally had time to read the optionsellers.com debacle. No one will mange your own money better than you. I think everyone here knows that. I read their book, actually good but maybe naked strangles on futures not the best idea.

Figured with a quiet trading day would pass this along.

Ramie 10:11 am on Wednesday, December 5, 2018

Interesting segment, thanks for posting. I know that we all love the idea of volatility decay on the leveraged instruments (hence short calls and call spreads on big spikes) but this market measures segment brought up something I didn’t know–that the standard deviations of 2x and 3x ETFs (on SPY) are more than double and triple the 1x. Makes sense if there’s a strong move in one direction. We’ve seen it with DUST, NUGT, etc.
MikeL 12:31 pm on Wednesday, December 5, 2018

It looks like this study does not really address selling put options or covered calls on leveraged products.
Going further OTM still offers better premium than most unleveraged products.
Of course, the concern is with the speed a leverage product drops in price when the market is going down.
Jeff 2:23 pm on Wednesday, December 5, 2018

It’s the inverse that concern me. 100% rise means an inverse goes to zero. That’s what almost happened to SVXY, and why they cut it to only a 0.5 inverse.
- fuzzballl 2:27 pm on Wednesday, December 5, 2018
  
  Kinda thinking the same thing. I’m going to be carrying some stock in some of these in an IRA. I may take my next round of covered call premium and buy a bunch of cheap puts (maybe 2x size) to help in an implosion. Also staying small with these (SOXL, TQQQ,TNA).
- fuzzballl 2:35 pm on Wednesday, December 5, 2018
  
  QQQ is 11 percent off it’s highs and TQQQ about 34 percent so it seems to be tracking correctly. I guess a big implosion in the Q’s could be a risk to TQQQ. Of course as TQQQ drops the percentage risk per day in dollar amounts reduces but it probably could still easily get to single digits.
MamaCash 4:03 am on Thursday, December 6, 2018

Results are based on margin requirements for SPY, SSO, and UPRO. If you don’t use margin, their study isn’t totally relevant. I’ve used SSO shares as a core component of my investment portfolio since inception. Over time, it has always outperformed the SPY. It will only go to zero if SPY goes to zero.