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Posts Tagged ‘3x Funds BGZ and BGU’

A Quick Comparison of 3x Funds BGZ and BGU

A Quick Comparison of 3x Funds BGZ and BGU

Courtesy of Corey at Afraid to Trade

With the S&P 500 up over 40% from its March 6 low, I thought it would be a good idea to take a quick look at 3x Leveraged Bullish Fund BGU and 3x Leveraged Fund BGZ for a chart and percentage comparison.  Let’s see them in action!

3x Leveraged Bullish Fund BGU

BGU

What’s surprised me the most is how closely BGU has tracked with the Dow and S&P 500 and doesn’t seem to be as affected by the “percentage decay” that other leveraged funds have suffered (see BGZ below).  It looks almost identical to the underlying index, despite being 3x leveraged.  That’s rare in the leveraged fund world.

We see the same “Broadening Formation” I discussed in a previous post on the Dow Jones.  The pattern is completing its upside target as shown here.

The one thing to watch is the glaring volume non-confirmation (or declining trend in volume) – volume spiked off the March 2009 lows at over 35 Million shares and now averages slightly above 10 Million – a significant drop-off.

Let’s compare the ‘chart perfection’ (in terms of tracking the underlying index) and now look at the Bearish Fund.

3x Leveraged Fund BGZ

BGZ chart

This pattern is what we would expect with a 3x (or even 2x) leveraged fund – quick swing ups (quick percentage gains) as the underlying index moves in a favorable direction but then a collapse as the index moves (in this c case) higher.

The risk in these funds is holding for a long time and trying to get back to break-even, which will never happen.

Notice that the S&P 500 made a swing low in December 2008 near 750 as the 3x Leveraged Bear Fund peaked at $130.  However, when the S&P 500 made the March 2009 low of 666, the BGZ traded at a lower high of $118.  The expectation was for the leveraged fund to make a much higher high but it was not the case – herein lies a major flaw of leveraged funds.

Leveraged funds suffer from percentage decay… the best example being that if you lost 50% of your capital, you could not muster a 50% gain to get back to where you started – you would need a 100% gain on your remaining capital.…
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Sabrient

Sector Detector: Fed tries to refill bulls’ fuel tank as cyclicals lead

Courtesy of Sabrient Systems and Gradient Analytics

The market went through some gyrations on Wednesday in reaction to Fed Chairman Bernanke’s testimony before the Joint Economic Committee. He first defended continued quant easing by warning, “A premature tightening of monetary policy could lead interest rates to rise temporarily but also would carry a substantial risk of slowing or ending the economic recovery.” Stocks dutifully rallied and all major indexes hit new intraday highs.

But alas, consensus is apparently not a given over the longer term. The minutes hinted that a tapering off could start sooner, “A number of participants expressed willingness to adjust the flow of purchases downward as early as the June meeting if the economic information received by that time showed evidence of sufficiently strong and sustained growth.” So …...



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Zero Hedge

Japanese Stocks Plunge 1000 Points - Biggest Drop In 26 Months

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

UPDATE: They are paniccing... BOJ injected 2 trillion yen ($19.4 billion) into the financial system to stem volatility following a circuit breaker in JGB futures trading.

All the time it is just the quadrillion JPY second-largest bond market in the world that is experiencing volatility on an unprecedented scale, the BoJ and her partners in crime are more than willing to 'officially' say "please do not worry." But when the equity market - that barometer of everything good and holy about Abenomics starts to crater, you can bet the excuses will co...



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Insider Scoop

Long Setup in Herbalife Still Attractive; Stock Breaks Out as New Auditor Hired

Courtesy of Benzinga.

Few stocks have attracted more news over the last six months than nutritional supplement maker Herbalife (NYSE: HLF).

Even casual market observers are aware of the circumstances surrounding the the initial bout of extreme volatility in the name back in December 2012. The shares went into free-fall at the end of the year after hedge fund manager Bill Ackman revealed in typical sanctimonious fashion that his firm Pershing Square Capital Management was short around $1 billion worth of the stock.

Amid much pomp and circumstance, Ackman laid out his short thesis at a New York investment conference and...



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Phil's Favorites

Most investors underperform their already underperforming funds

Interesting article by Joshua Brown on investors performing worse than the funds they trade in and out of. It's the same principle at play that Paul Price describes in his article: March Madness and Your Trading Decisions

Most investors underperform their already underperforming funds

Courtesy of 

At my shop we spend more of our time thinking about how we can succeed through behavior rather than through trying to find the next hot stock or fund manager.

We're always fascinated by those who choose the other, less rational route and we ...



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Option Review

Big Volume In Saks Options As Shares Rip Higher

 

Today’s tickers: SKS, USG & PFE

SKS - Saks, Inc. – Timely bullish bets initiated in Saks options just seconds prior to the closing bell on Tuesday are generating sizable gains for at least one trader today, with shares in the high-end retailer up at the highest level since 2008. The stock closed Tuesday up 11% on the day at $13.67 after the company reported first-quarter revenue above average analyst expectations. Within minutes of the close shares in SKS moved sharply to the upside after the New York Post, citing a source familiar with the matter, reported...



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Chart School

S&P 500 Snapshot: Fed Induced Bipolar Disorder

Courtesy of Doug Short.

With yesterday's dovish duo Bullard and Dudley to set expectations, the S&P 500 rallied in anticipation of Chairman Bernanke's congressional testimony and soared to its all-time intraday high, up 1.07% during his prepared remarks. But the Q&A deflated the balloon, and the 2 PM release of the latest Fed Minutes accelerated the decline. It seems that the possibility of tapering QE in the near term is not entirely off the table. The index hit its -1.23% intraday low about 30 minutes before the final bell. It then trimmed its loss to close down 0.83%. The 10-year yield jumped 9 bps to close at 2.03%, just off the 2013 interim high of 2.07% on March 11th and 37 bps off its 2013 low set 14 sessions back.

Here is a 15-minute look at the week so far.

Not surprisingly the volume on today's 2.32% high-low intraday range was 24% above its 50-day movi...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Market Montage

More History

Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

Doing a lot of data mining as we watch this market go parabolic.

The S&P 500 is 13.4% over the 200 day moving average.  10%+ is considered overbought, and 12% is very rare.

The current Relative Strength Index (RSI) on the S&P 500 is 75.  Over 70 is generally overbought (below 30 oversold).  To put in perspective in 1999 the S&P touched 70ish a few times but never hit 75.   The NASDAQ in 1999 – early 2000 hit mid 70s a few days in July 99 and Mar 00.  Then in the parabolic move in November and December 1999 (NASDAQ gained over 1000 pts!) it sat between 70 and mid 80s for most of two months; of course t...



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OpTrader

Swing trading portfolio - week of May 20th, 2013

Reminder: OpTrader is available to chat with Members, comments are found below each post.

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here

Optrader 

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Stock World Weekly

Stock World Weekly

NEW: Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest Stock World Weekly! Just sign in with your PSW user name and password, or sign up to try it out. 

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IRA Strategy/Income Trader

The IRA portfolio

Reminder: Craigzooka is available to chat with Members regarding his virtual portfolio performance, comments are found below each post.

By Craigzooka

I am going to share with you how I manage my IRA and the power of reducing your cost basis.  My goal each year is a 20% return in my IRA.  Sometimes I make it and sometimes I don't, but I believe that all of my success is due to reducing my cost basis.  To illustrate the power of reducing your cost basis here are some trades we did last year.  These trades are taken from an educational portfolio we ran in a paper-trading account for a little more than a year.

  • We bought RIG on 5/15/2012 for $44.13, sold it on 1/18/2013 for $46 but booked a profit of $1,154.
  • We bought MT on 1/4/2012 for $19.24, sold it on 12/21/2012 for $15 but booked a profit of $454.
  • We bought CHK on 1/27/2012 for $21.93, sold it on 10/19/2012 for $18 b...


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ETF Selector

Stock Market Gets Big News After Friday’s Close

Courtesy of John Nyaradi.

Stock market posts another record setting week, but the big news came after Friday’s close.

Courtesy of NASA

The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.

For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...



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Pharmboy

Give Them an Inch, They Will Take a Mile

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi.  Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward.  So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...



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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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