Direxion Daily Technology Bull 3X Shares (NYSEMKT:TECL)

CAPS Rating: 1 out of 5

Recs

2
Player Avatar fooletfs (90.55) Submitted: 2/9/2011 3:58:25 PM : Underperform Start Price: $55.45 TECL Score: +32.39

round 5 reloads of racking up points on this strat with these picks:
testing what's been said here on CAPs.
Do shorting all 3x ETFs mean easy net returns?
YES, IF, you rebalance once ratio of a pair goes 1.7 (or 1/1.7)

In a sideways or down market this would also translate into net points on CAPs
But your accuracy will be hurting, you'll mostly be 50% accuracy

short all these etf pairs:
BGU/BGZ
FAS/FAZ
ERX/ERY
DRN/DRV
MWJ/MWN
TNA/TZA

Further on my personal thoughts on this strat:
using hypothetical scenarios, actual 3x #s from '09, and 2x funds from differing periods:

Worst case scenario, this strategy loses in a year: (5%)

Best case scenarios in a year: 10%+

Should expect most returns in a year: 3-7%
Remember, because of leverage, your broker will require to reserve alot of capital. All that capital COULD have been used for other return earning investments, thus with all the reserved capital, you have to assume all of that as part of your short investment which is why you wouldn't expect that high of a return on this strat (thus +3-7% expected)

In implementing this strat, pray for two things: 1) Hope your short shares don't get called back by broker & 2) if in rebalancing you wish to increase position, hope you can short more.

This strategy may be a good play to allocate comparable to the fixed income/bond allocation of portfolio or completely replace that bond allocation with this.

I would say maximum amount you sell each position is 23% of face value of account. IE a $10,000 acct, short sell a maximum $2,300 worth of each ETF ($4,600 total for a pair - see? $10,000 is reserved instead of just $4,600).

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