3 ms·

I bought an inverse, rather than shorting. I don't think it likely, or possible, for the 30 yr to go much lower. I can wait, my position doesn't have any time

by rmrm 15y ago

I bought an inverse, rather than shorting. I don't think it likely, or possible, for the 30 yr to go much lower. I can wait, my position doesn't have any time decay, and I'm in no hurry.

amalag 15y ago
If you bought an inverse and you think you have no time decay, then please read the prospectus. Inverses are comprised of various instruments (including put options) and DO have time decay. If you read the prospectus you will see they are for replicating the movements on a DAILY basis. If you hold overnight for regular periods of time you are in for a shock.
- rmrm 15y ago
  yes, most do -- that is what I alluded to in my original comment about all methods having their downsides. Most are not suitable for long term holding and you would end up with assymetric exposure (more downside than upside, over time, for a given move over time) due to compounding effect. I'm aware of that, you're absolutely correct. I have read their prospectus also. I decided to buy an ETN which does not have this specific problem. But I am of course paying a fee for the trade, so I guess you could call that a decay. And, since it is an ETN, I am taking on credit risk from the issuer -- which is the more salient downside. Like I said in OP, all the methods of doing this have downsides. But I am comfortable with what I am doing, I believe the upside/downside risk is well in my favor. Of course read the prospectus. As always, everyone should do their own research, and seek to find instruments they feel comfortable with, and they believe are suitable for whatever it is they are trying to do.
  - amalag 15y ago
    I didn't know about ETN's, thanks.
  - steve8918 15y ago
    I'm pretty sure inverse ETFs/ETNs use swaps or futures. If this one is done through futures, you need to worry about contract roll, which introduces loss. Which particular ETN are you referring to? I'd be interested in reading the prospectus.
    - rmrm 15y ago
      yes, there is a rolling cost but it's fairly small, at least relative to the mgmt fee. All up it costs around 0.87 a year. Not cheap and more than I would normally pay, but it does what I want. I didn't want to be seen to make any specific recommendations, so please no one take it that way. This is what I chose. Below is the Long, there is also a 10 yr. http://www.ipathetn.com/pdf/dlbs-prospectus.pdf http://www.ipathetn.com/pdf/dlbs-prospectus.pdf
      - steve8918 15y ago
        FYI the rolling cost on UNG and USO is the main reason why its unprofitable and doesn't track the price of NG or CL very well at all. Many traders frontrun the roll, causing it to lose money every month.

by rmrm 15y ago

I bought an inverse, rather than shorting. I don't think it likely, or possible, for the 30 yr to go much lower. I can wait, my position doesn't have any time decay, and I'm in no hurry.

amalag 15y ago

If you bought an inverse and you think you have no time decay, then please read the prospectus. Inverses are comprised of various instruments (including put options) and DO have time decay. If you read the prospectus you will see they are for replicating the movements on a DAILY basis. If you hold overnight for regular periods of time you are in for a shock.

rmrm 15y ago
yes, most do -- that is what I alluded to in my original comment about all methods having their downsides. Most are not suitable for long term holding and you would end up with assymetric exposure (more downside than upside, over time, for a given move over time) due to compounding effect. I'm aware of that, you're absolutely correct. I have read their prospectus also. I decided to buy an ETN which does not have this specific problem. But I am of course paying a fee for the trade, so I guess you could call that a decay. And, since it is an ETN, I am taking on credit risk from the issuer -- which is the more salient downside. Like I said in OP, all the methods of doing this have downsides. But I am comfortable with what I am doing, I believe the upside/downside risk is well in my favor. Of course read the prospectus. As always, everyone should do their own research, and seek to find instruments they feel comfortable with, and they believe are suitable for whatever it is they are trying to do.
- amalag 15y ago
  I didn't know about ETN's, thanks.
- steve8918 15y ago
  I'm pretty sure inverse ETFs/ETNs use swaps or futures. If this one is done through futures, you need to worry about contract roll, which introduces loss. Which particular ETN are you referring to? I'd be interested in reading the prospectus.
  - rmrm 15y ago
    yes, there is a rolling cost but it's fairly small, at least relative to the mgmt fee. All up it costs around 0.87 a year. Not cheap and more than I would normally pay, but it does what I want. I didn't want to be seen to make any specific recommendations, so please no one take it that way. This is what I chose. Below is the Long, there is also a 10 yr. http://www.ipathetn.com/pdf/dlbs-prospectus.pdf http://www.ipathetn.com/pdf/dlbs-prospectus.pdf
    - steve8918 15y ago
      FYI the rolling cost on UNG and USO is the main reason why its unprofitable and doesn't track the price of NG or CL very well at all. Many traders frontrun the roll, causing it to lose money every month.