Originally Posted by schoy
Took a small position in FAZ yesterday, felt vindicated with the bank downgrades, and then today happens. At this point, I wonder if I should just ride it out or bail. I suppose I'll just let it sit LT.
You have to be aware of the "compounding interest error". What it means is NOT necessarily that you'd be losing money 100% of the time if you left it in and rode with it. All that it says is that interest compounds greater than what the index's arithmetic is: addition.
Say you bought in at index level: 12,000 on DJI. FAZ worth, just making it up, $100 dollars. All it means is that if the Index falls or goes up and repeats this cycle, the next time the DJI is a 12,000 will NOT mean that FAZ is still at $100 (because of the nature of how it compounds 3x daily). So they could work BOTH ways for you. On the one hand, if you think the index is going to definitely go below 12,000 then FAZ will probably hit above $100 on the way down.
But it could also not. Personally? I've ridden out 2x ETFs before for about a week and it's worked out for ME. Under the market circumstances at THAT time. It all depends on how you want to work this.
Most negative ETFs, if you had them in holding, were losing considerable money each week, each month, and each quarter, up until the crash of 2008. Where they returned upwards of around 38% on average. So, up to you. Work it out yourself and do some more reading.