No. of Recommendations: 8
Is there any difficulty in getting shares to short with these ETF's?

And I'd add to that: is there any cost? As I recall, even when some stocks are shortable, a select few of them can have a pretty heavy borrow cost. And often the stocks with the heavy "hard to borrow" fees are the leverages ETFs. I think it's precisely because people have found out how to profit by shorting pairs.

An example at IB (http://ibkb.interactivebrokers.com/node/1146) gives a fee of 50% annualized. Now that's just a meaningless sample number, but it's interesting to note that it's roughly equal to the strategy's CAGR. Ah, just found a real (if old) example: FAS had a 24% in 2009 (http://wheredoesallmymoneygo.com/hard-to-borrow-fees/). Not as bad as 50% but it still makes a big - and sure - cut in returns.

The really pesky thing is that this is something we can't backtest. Short screens are already hampered by not knowing what stocks were shortable in the past, and I think the leveraged ETF situation just makes it even harder.

- Jamie
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement