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Author: miro26 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 482006  
Subject: Re: Question on SKF Date: 10/5/2008 1:23 PM
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<Markets with extreme day-to-day volatility are particularly unkind to these leveraged ETFs. These ETFs are a good way to get juiced-up returns when you're right and you have a short-term outlook. Long term, the fund will trend further and further away from the promised -2x daily performance as the compounding of losses really works its way in.>

Thanks for doing the math on this, inept. Pretty simple really. I want to point out that you have the same sort of issue on the long side as well. I have been watching UWM (double long the RUT) and its performance on any given day can vary wildly from a simple doubling of the move on the Russell 2k. As a matter of fact, I have grouped the Proshare ETF's on my trading station to get a feel for how they trade and there will days when the UWM tracks the single long IWM and days in which one is in positive territory and the other negative. Pretty crazy. I wonder if you could successfully pair trade the long-short and arbitrage the discrepancy (as long as you have an opinion of the general trade for the day, of course) and reduce the risk profile. Does that make any sense to the traders out there?

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