B**********r
发帖数: 7517 | 1 Many of us on this board trade 3x FAS/FAZ, but it appears we had fewer
discussions on the less volatile 2x UYG/SKF. One question is to know how
fast they decay. Let us look at the 2-month time period from August 12 to
October 12.
UYG/SKF is based on Dow Jones financial index (IYF), as compared to FAS/FAZ
on Russell 1000 financial services index (R1FINL:IND). IYF closed at $47.62
on August 12, and $47.21 on October 12. That is a loss of 0.86%. If there is
no volatility decay, UYG should be down about 1.7% and SKF up 1.7%.
UYG actually was down from $43.78 to $41.91, a loss of 4.3%. Therefore, the
decay is about 4.3%-1.7% = 2.6%. SKF actually was down from $78.30 to $71.58
, a loss of 8.6%. Therefore the decay is about 8.6%+1.7% = 10.5%. Note, in
the calculation, I use the close prices, not the net asset value (NAV)
prices, and the precise decays may be slightly different.
This result mostly confirms my previous calculation. For a nX ETF pair, the
bull ETF decay is proportional to n(n-1), and the bear ETF decay is
proportional to n(n+1). SKF decays 3 times as fast as UYG.
My conclusion: we should avoid holding these wall-street inventions,
especially never long the leveraged bear ETFs. | u********e
发帖数: 4950 | | B**********r
发帖数: 7517 | 3 Volatility decay is proportional to square of the index volatility. it is
clear, just imagine (1+x)(1-x) = 1-x^2.
But it is less obvious bear ETFs decay much faster than bull ETFs. So be
more careful on holding bear ETFs like FAS, TZA, SKF.
BTW, today I shorted both deep ITM TNA calls and FAZ calls. Both are in profit now, and will let them decay till next Friday expiration. |
|
