Umh, if I go to submit a sell order on 100 shares of FAZ, IBKR says the maintenance margin is $855. An order of 100 shares of FAZ is roughly $950 dollars short, hence, my claim of 90%. But it sounds like I'm mistaken, how do you determine the MM on FAZ? Thanks!
What you say boils down to claiming that it is always better to leverage and increase exposure as a market declines. To the extent you aren't forced to liquidate (because the position is small to begin with) and to the extent markets will recover, then this always makes money. I don't disagree given those assumptions. I only disagree with the assumptions being a given.
Are you referring to the PV graph? That's probably not delta-neutral, PV just thinks it because it uses monthly data. The only way to make money pair trading SQQQ and TQQQ is if you go delta positive after market declines (SQQQ short grows, TQQQ shrinks) and vice-versa. It's as though it was delta-neutral in a large time-scale but it really is just market-timing (increasing stock exposure when stocks drops and vice-versa).
I don't think I follow, do you have an example? Thanks.Thereum wrote: ↑Sun Nov 22, 2020 5:15 pm 3) Using options to define risk. I used to short SQQQ using call spreads, but I have switched to buying very short term call options, making the position more like a diagonal. These call options typically cost a few pennies but will completely protect me against a crash like we saw March 2020. In fact, I have structured my trades to actually profit if this happens.
Yes, I understand what you meant but vega is the wrong term there. In options lingo, realized volatility is known as "gamma". You're right that long TQQQ does poorly with high realized volatility. Like I said already, it is like TQQQ is short gamma.Thereum wrote: ↑Sun Nov 22, 2020 5:15 pm By the way, you corrected me about the greeks. I was thinking about things a bit differently. What I was trying to suggest is that leveraged ETFs under-perform if realized volatility is high. For instance, if the SP500 is flat for an entire year, then SQQQ and TQQQ will be down. I believe this is a mathematically certainty (someone please correct me if I am wrong). The higher the volatility during this period, the more the leveraged ETFs will have fallen.
Since TQQQ is long vega and short SQQQ is short vega, then it's pretty easy to find examples where the former outperforms. You just have to find cases where markets trended (even with high realized volatility) and ended up far from their initial state.
I don't need to check but long TQQQ probably stomped short SQQQ since April 2020 for instance.