Thinking this is a counter / bear rally, and we retest and maybe even breach lows, at least one last time.
I don’t have futures trading yet…just never looked into it.
In meantime, I thought maybe SQQQ, a 3x inverse ETF of the QQQ might do the trick.
Anyone have a primer on how this works in terms of holding more than one day? I know there were certain (I thought) inverse vehicles that aren’t meant to ever be held more than 1 day due to decay. Thinking stuff like the one I remember tied to natural gas that I had a horrible trade in a few years back.
Not sure if that is the case here though. Thinking it must be.
If QQQ at 342, and this SQQQ somehow does 3x inverse, and nasdaq dropped 1%, the SQQQ should be “up” 3%, is how I understand it. But the math doesn’t work out when you remove percentages.
If QQQ magically dropped to 120, the inverse math gets wonky. plus if you look at max chart of SQQQ you will see what I mean. So if I believe nasdaq WILL drop again, but not sure WHEN or WHICH day, not sure if utilizing SQQQ makes sense.
Anyone familiar with it out there?
And yes, I know options exist, but they have their own decay and weirdness and I just prefer the simplicity of equities.
Dreamer
found this SA article that includes SQQQ, but it didn’t make it much clearer for me.
in a nutshell, I think you only want this intraday.
But what makes no sense about that, as most of us know, the markets often show as up/down big in premarkets. So unless you had the position going in, you don’t usually capture the full move of the day, as it opens lower/higher than the previous day’s close.
blah.
I think stuff will go down. Shouldn’t be so complicated to go short.
Dreamer
Many years ago I used a couple of times the SDOW, which is a killer.
After a couple of days of buying/selling, when I broke even, I stopped.
You can make money very fast with a 3x inverse ETF, but I had the impression that loosing money went even faster. I might be wrong, but if the index goes up 1%, you go down 3%, but if the index goes down 1% you go up less than 3%. There is an explanation for that, but I forgot it.
Using options might be a much better alternative, but you need to really understand how they work.
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I think stuff will go down. Shouldn’t be so complicated to go short.
It isn’t. Just sell short the QQQ or whatever index/equity of your choosing. No worry about holding for a while. No expiration. Buy back whenever you want.
You do have to pay a small interest rate (varies based on what you are shorting).
You need a margin account.
AJ
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Consensus is that leveraged short ETF’s are quite likely to lose money, quite rapidly. Not sure of the “proper” usage of them.
A simple unleveraged short ETF is the easy way to short a sector and I think would be suitable for the kind of market we are in now.
If you want a really radical (?) and crazy idea, try this:
Writing covered call on, say, UPST with a 0% strike price (i.e., strike price very near or below current price. UPST closed at 116.58 on Thursday. The April 14 call with $125 strike price gives you a 9% “static return” (stock closes below $125) or 16.2% if called. The 5/20, $120 call returns 18.1% static return and 21% if called. That annualizes to 117%. Of course, that assumes there is a call with similar characteristics at 5/20, and then again in July, September, November, etc.
I woke up wee hours of the morning, made major move towards cash. Very dangerous. Probably a good sign for Dreamer to make a move on the stocks he likes best as I am nearly always wrong. Whether it works out well or poorly, it will result in a careful reconstruction of my port. One of the dangers is that if I buy back before those sells are settled, I can’t sell the new buys until the Thursday sells settle—I think. In other words is I get FOMO and buy something on Friday, then I am stuck holding them until Tuesday or Wednesday. Is that the way it works in an IRA? In a regular taxable account?
KC, who would now be happy to see UPST at $100 again. $88.88?
Not a bad idea on overwriting UPST. Depends on a couple things. If you own it are you ready to let go. And if you have cash are you willing to settle for a capped return? This all comes down to timing. We know which direction this is heading but when? Just my 2 cents.
VAMtneer,
Not my job to be the welcome wagon, but welcome to the board (I don’t think I have seen your handle before, I certainly could be wrong).
The UPST calls definitely a conflicted strategy. I had UPST as 28% holding along with 20% cash. So one way to look at is, would I be happy to make 20% in 2 months versus holding cash for cushion/opportunistic buying? 20% definitely caps the gain and still leaves the risk losing 20% (or so).
Hmmm,18.1% on the sale, buy more UPST, sell call on that, …Until the premium is less than $11,658.
In any case, the break-even price is $141, and one risk is that UPST goes above that (the other is that it goes to $70). Just a thought experiment. 
KC
Thanks KC.
I mostly lurk around here and Saul’s, don’t post much as I don’t have much to contribute to what’s already being said.
This market feels like a coiled spring. If we get resolution with Ukraine/Russia I feel we can power up fast, especially in beaten down tech/growth. Trying to figure out where the baseline P/S ratios lie for these companies. I think there is opportunity out there but what do I know.
Good luck with the UPST calls.
VAMtneer