Buying Puts on Both 3x Bull and Bear ETFs
See my last post for an explanation of why both bull and bear ETFs trend down over time.
I plan to play this using (slightly out-of-the-money?) puts on a 3x bull ETF and the corresponding 3x bear ETF.
The options are pretty liquid but they are pretty expensive because the underlying indexes are volatile.
Interestingly, people don't appear to be using my strategy. Calls and puts on the 3x ETFs have approximately the same implied volatility.
I haven't pulled the trigger yet because I can't decide which strike prices the options should have. I will buy the options that have the longest (July 09) timeframe.
Let me know what you think of this idea.