Would anyone please point me to prior discussions regarding the "beta slippage" risks of the leveraged ETF strategy?
Here's what I mean: today UPRO stands at ~50, with SPY at 321.7
On 12/23/19, SPY closed at approximately the same level, 321.2 and UPRO closed at 69.8
i.e. SPY has recovered to ~December levels whereas UPRO is lagging by ~30%.
I see that HF and others refer to this as "decay", quoting the original post:
$6.80 is not 3X $2.76. That's the "decay", and it's nothing more than simple math. This dynamic can also work in your favor: if you check the performance of UPRO against the S&P 500 since inception, you will see that UPRO has delivered 5x the returns of the index. If an index tends to go up over time (i.e. exhibits positive momentum), a 3x leveraged ETF will tend to perform better than 3x the index over the long term.
but I'd like to read more recent discussions on the topic if any, particularly relating to the current macro-environment.
I've been using this interesting strategy for about a year and was heavily down in March, but averaged down on UPRO to ~27 during the bottom, with a bit of TQQQ purchased near the bottom (though just around 10%). I've been slowly shifting into TMF but I'm considering terminating my leveraged positions for now, as we seem to be in bubble territory propped up by the Fed; It's not clear to me that with interest rates so low, treasuries are in the same category that they've been in decades.
It seems to me that reality will catch up in the medium term, and hedging appears expensive. But of course, the market can remain weird longer than anyone can stay solvent
That too I'm sure has been discussed--I'm reading through all of your interesting posts, but it would be really nice to have an index feature!
Would welcome any insights or corrections--thank you!