Xtrackers S&P X2 vs inverse X2 - both net loss?

📊 Investing
1

Hi - I have just taken a look at the xtrackers S&P500 ETFs. I am a little confused at how both the regular 2x leveraged tracker and the 2x leveraged inversed tracker are BOTH showing negative price movement for the last week? How is this possible? Surely the idea is you are either short or long. But if you lose both ways this surely makes no sense?

1 Like
2

In buying either ETF you are effectively taking a position in USD. Suppose the S&P500 remained flat for the week, but the USD depreciated against the Euro. Then both ETFs would show a price decline.

1 Like
3

Also consider the ETF fees. As they are leveraged ETFs the fees are typically higher to account for the borrowing costs. So if the S&P index remained flat you’d be down as the fees are factored into the unit price.

4

I might be oversimplifying the answer but another factor might be leverage decay.

High volatility kills leveraged ETFs.
The constant up and down of the index they are tracking makes them lose more and more value, which is why they are meant for short directional plays over buy and hold strategies

1 Like
5

Yea, i’ve taken little dabbles here and there (£10 etc) into these and I just can’t see a sound way to make it work well.

USA market goes down, dollar rises - in turn making the return less.
ETF fees eat away profits, albeit slowly.

Would love to know some strategies to make these work better, i’m failing to breakeven everytime I try. :confounded:

6

From what I’ve heard the best way to use these is for daytrading trend reversals.

You use the long, the short and the index they are tracking in conjuction.
In this case ^GSPC

You watch GSPC and take a position in the inverse when an upward trend breaks, and just ride the momentum.
Same the other way around.

Definitely not for buy and hold.

Except maybe if you can teleport back to February 18th, and buy the inverse and hold until March 24th. Hehe

1 Like
7

In short after studying the movement of these, I have concluded they simply offer terrible value.

CaptainDangernoodle, “day trading tend reversals” is exactly what I was interested in doing :wink:

I actually now think the simplest way to day trade S&P500 trend reversals from the UK is actually to use CFD.