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buffalonate (93.97)

Leveraged ETFs

Recs

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May 03, 2011 – Comments (0)

I recently wrote a blog last week stating that the market was due for a pullback due to inflation, high oil prices, gdp growth slowing down, and a 4% rise in the dow in 1 month.  I argued that the market is 10% off of its historical high and with gas prices hurting margins and the unemployment rate at 8.8% that a pullback was virtually certain.  I said that I was going to invest money in 3x leveraged bear etf's in anticipation of a pullback or at least enough volatility to make money.  People said you can't time the markets and that these leveraged etfs are guaranteed to lose you money.  I would argue that if you pay close attention to the technicals that leveraged etfs can be very profitable.  I invested in a 3x qqq bear etf(sqqq) and a 3x smallcap bear etf(tza) last week.  I felt so confident the market would pull back enough to make these bets profitable that I even put my mom's money in them.  The market pulled back today and we made a 6% and 8% profit respectively in less than a week.  I also recently put money in a regional bank ultra etf(kru) and a financial 3x bull etf(fas) because both were at technical lows for the month and I am a long on the financial sector.  I sold both of them yesterday for a 6% and 12% gain in less than 2 weeks.  I don't recommend investing more than 10% of your money in leveraged etfs because there is definitely risk involved but if the fundamentals and technicals are good you can make some very easy money playing the volatility.  If you are a novice investor you should stay far away from anything leveraged.   

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