… and if this is the case, and you have convictions that share X will gain massively in the next day, 3 days 2 weeks etc, there are much more lucrative tools like CFDs and Options, without throwing your money away.
Hey @kali ,
I see that you understand the mechanics but I am not sure what you mean by ‘pseudo ratios’? As mentioned, these are daily leveraged products - not weekly, not monthly.
In terms of the fees, these amount to ~0.00479% per day. Any trader looking for more exposure or looking to short / hedge (using inverse ETPs) could vouch that these are cost-effective and transparent means of getting the desired exposure (compared to buying on margin or borrowing stocks to sell short).
Hope some of this is useful and would be glad to hear your feedback.
Regards,
Oktay
Hey @santy,
No table summarizing them all, but I put together a chart of some 2x ETPs vs their underlying stocks (the 3x and -1x ETPs were issued in June, so no historical data on them yet).
The data shows one year performance (source: Tradingview).
I think I already wrote what I mean by pseudo ratios, underlying stock gaining 1% does not automatically mean, written etp is getting 2% as drawn in the tables.
Morgan Stanley MMF is at 1.04% at this moment 22:41 GMT+1, plus your overnight fee of 1% should mean 2.04. plus the annual management fee 0.75% this will cost average buy and hold investor 2.8% annual. It is not cheap for my taste, but you might be right may be its cheap for some people.
even if I assume this 0.00479% is correct, may be you get loans consistently a lot cheaper than interbank money market funds, 0.00479% daily will account into something like 1.74735%(actually more, but too lazy to deal with compounding interest at the mo) annual + your management fee of 0.75% thats 2.5% annual, still not cheap for my taste.
So… in my opinion this is not a good or cheap tool for mid/long term investment, it can be considered acceptable if someone knows that a particular instument will make real gains in a short time period.
and… this tool is lucrative enough “leverage shares” to do self shilling in forums
peace out.
Appreciate the feedback!
2 things:
- It’s not cheap compared to delta-1 products that simply replicate the moves of the underlying - but for a reason. You are getting inverse / leveraged exposure, so we should compare apples to apples.
- You are correct. These are meant for active traders / experienced investors and the recommended holding period is actually one day. Of course, momentum could make them a good swing trading candidate over the longer term too (as you can see in the bar graph above).
P.S.: I am not making any recommendations, just trying to help the community understand these products better - and also why I have the disclosure in my profile