I bought and have held a combination in a separate account 55% UPRO with 45% TMF. TMF historically acts as a counterbalance to the downswings of UPRO. I started in Feb 2019, and have held the entire time, rebalanced quarterly, my total return is 155%. Check out this Bogleheads thread (there are 2 long ones) for details on the strategy and reasoning. Part 1: www.bogleheads.org/forum/viewtopic.php?f=10&t=272007 Part 2: www.bogleheads.org/forum/viewtopic.php?f=10&t=288192 The original poster in that thread is no longer an active member of that forum, so the chart doesn't get updated anymore. There are many of us who continue to invest in this strategy; a lot with different variations of it as well.
@@kevinbandy249 Interesting! I personally will stick to using leveraged ETFs as tactical/actively managed investments because of my risk tolerance level. But 155% over just shy of two years is very solid performance! If you don't mind me asking, how did it perform during Feb/Mar of 2020?
@@TactileTrade Check out the Part 2 link in my comment above. You'll see the chart with the last update from the person who started that thread there (he no longer updates it). It fell down to the original investment balance (no added contributions by the way - just a lump sum investment in this strategy). But obviously, it way more than made up for it since. Portfolio Visualizer shows that this strategy returned 66% for 2020. The drawdown in Feb/Mar was only 13.5% vs 19.6% for S&P 500... :) www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=100000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=3&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&benchmark=VFINX&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=UPRO&allocation1_1=55&symbol2=TMF&allocation2_1=45
@@louisvuittondonvg9040 To each their own but for me personally, a 52% DD is not acceptable. People underestimate what it actually feels like to lose half their investment.. If it's a small part of a portfolio, sure but if we're talking about someone's like savings, it's a different story
Yeh and he was like 41% drawdown is too high? Lol what is he managing fucking 10 billion family office? In your wildest dreams anyone offered even 20% would be insanely lucky. Buffet achieved 20.5%
I’m glad you liked it! I felt compelled to make it because I’ve seen lots of videos on RUclips talking about just buying and holding leveraged ETFs. This has worked out great since the March 2020 bottom of course. But during the next recession these ETFs are going to get annihilated and I’m concerned investors are getting overly complacent.
Since inception in 2007, qld survived the bear market of 2008-2009, the rough market of 2017-2018 and the 2020 COVID-19 pandemic crash. Since inception qld annualized return is 24%. Buying and holding qld for the past 15 years (even during the crashes) would have been a success. If it survived and rebounded from 08 and 2020, it has been « battle tested », chances are that it will do the same for the next 15 years. Buy and hold can work. And if you just keep on investing in it month in and month out, you could really grow your wealth massively in a decade or so. My 2 cents based on historical and empirical data. Thanks for the video. It was great.
Yeah QLD has done quite well especially post-March 2020. This is of course due to tech's stellar decade. I'm sure tech will continue to dominate into the future too. Any leveraged ETF will still result in some pretty serious drawdowns from time to time though. The point of the video is to try and come up with a system that can avoid a situation where you find yourself in one of those drawdowns and end up waiting years to get back to breakeven like in 2007 - 2010 for QLD. Glad you liked it and thanks for your support!
What’s so bad about draw downs? Couldn’t you just buy more when it’s cheaper and hold it till it spikes back up which is always seems to do and then sell it at its high point?
@@jaimevaldez3586 exactly my point. Drawdowns should be not “much” of a concern if your time horizon is 10+ years. Emotionally it can of course be taxing to see a huge drop in the position. Instead of selling, that makes an excellent opportunity to start averaging down during the crash period and add little by little, like in Feb-April 2020. Also, in an extremely volatile leveraged index, buying ONCE and hold is a bad idea. There must be an investment plan in place that buys a certain amount EVERY TWO WEEKS for at least 10 years. Because if you e.g. buy a big lump sum at the high of 2021, the crash will be severe and it takes YEARS for your to make a positive return from that point. Drawdown matters if you are a day/week trader and need to sell your position. I also think that for long-term, a 2x leverage index is more suitable than a 3x one. Also investing in any leveraged ETF other than big major indices (like s&p and nasdaq) is a terrible idea. Many of these ETFs have been wiped out. At least with s&p we’re almost certain that the trend is upwards in 10 years from now and the value will be significantly higher.
The allure of meme stocks is hard to ignore. Hopefully at least more people will be steeled for when the next big market crash happens, since they'll likely be accustomed to big drawdowns already! Those who've just bought TQQQ and sat on their laurels might be in for a bit more of a shock
@@TactileTrade Yeah, those who bought TQQQ when it's high. Even if that's the case, it really wont matter if you dont panic sell when it's low. The problem with most investors is that they buy high and sell low instead of the other way around.
Selling covered calls/iron condors to collect some premium on these ETFs and using the premium to buy additional shares when prices dip (say by 30%) works well. Buy low sell high always works. Imagine how many additional shares one can buy when the ETF is down 72% and the subsequent LIFTOFF
Exactly. Just look at TQQQ/UPRO when S&P hit 200EMA weekly in 2022 early 2023. Gains would have been MASSIVE. (I have it in my portfolio, biggest mistake is that i don't have TQQQ and that it is a small sum)
Eli, I wish we could get an update on the performance of your asset class rotation strategy in the past few years in these market conditions. I can imagine the past 6 months your portfolio has done quite well 😂
Thanks for the support and taking the time to watch, glad you got something out of it! I don't really read books on investing, I just started out with index funds, and then began learning about options, volatility and how they affect equities and vice versa. Mostly from scouring the internet and many many many hours in Excel and later QuantConnect / Python.
Accumulate under 200 day by selling puts and run a covered call campaign full time. Start at a 30 delta and sell in 2 dollar increments down in price. Same for covered calls to the upside so you don't limit the upside by as much
I don't see the problem with volatility. There is an easy and time tested way to bring volatility down: fixed income and rebalancing. You can get whatever risk/reward you prefer by throttling the degree of fixed income investments you have. When you rebalance, you use some of that fixed income to buy more shares when the volatile thing gets slammed, and sell shares when it's riding high to take profits. If UPRO is more volatile than S&P 500, that just means you need more fixed income to get the same results and you still come out ahead.
May you share the website or tool that you used for creating a strategy like "If Market Sentiment Index (MSI) < 75%, go long on UPRO, otherwise stay in cash".
Im using buy and hold which I started in May 2024. It is up 23% 15 June 2024.I use stoploss set at trailing 10%. There isn't much risk as the position will close automatically with big dips.
The best strategy is to stick to a percentage of your portfolio to leveraged ETF and rebalance every quarter to a non leveraged product. Just stick to the percentage so you average down in a bear market and sell in profits in a bull market. 20-30% seem fine to me and selling when hitting 40-50% to get back to your initial 20-30%.
I think leveraged ETFs should generally be used as a tactical/actively managed instrument but of course everybody’s going to have their own strategies.
I have searched the picture on Google. ONLY his website seem to show up. So 1. ALL other pictures have been wiped from google with this picture (not that likely) OR 2. He made the picture/indicator himself
How do you feel about entering into a leveraged ETF now because the market has been down almost 30% and an ETF like TQQQ is down 70% and is at a 52 week low. If you do enter now would you still hedge with a leveraged bond ETF like TMF? Thanks!
sounds like hedgefundie excellent adventure, this period of time has been really horrible for leverage because bonds and stocks collapsed in tandem. I do think though some leverage through time is a good strategy and you could do something like NTSX etf which is 1.5x 60/40, vs something like URPO/TMF which you can basically make a 3x 60/40
Thanks for this video! Most other videos assume buy and hold and fail to acknowledge that despite decay and drawdowns, there's some serious outperformance to be had here. But mainly, they neglect to take into account the power of these products if you have a protective strategy for downturns in the market.
I would imagine TQQQ would be very similar to UPRO but probably a higher return and higher volatility given how QQQ has been over the last decade. Glad you enjoyed the video!
@@TactileTrade I went looking everywhere for that Market Sentiment Index but then read your reply to somebody. Maybe someday you could release it somewhere.
@@Andrew-3445 I actually am planning on sharing the MSI readings along with all 3 strategies every morning with the community via our subscription service starting tentatively in April/May. One of the metrics that go into it is called the 30 Day Volatility Risk Premium. It's the VIX - HV(30). I explain how to calculate it in my video on the VIX index. I will probably share more of the metrics that go into it in the future but the exact methodology of the MSI itself will have to remain my 'secret sauce' as it is essentially the lifeblood of my business as well as a few strategies I am working to deploy with a quant trading fund.
Thanks so much for the video. Liked it so much. Can i ask if you've done a test on Dollar cost averaging UPRO for monthly, every six months and yearly? many many thanks.
I'm glad you liked the video! Thank you so much for commenting :) The tests in the video don't assume dollar cost averaging. They just assume a 10,000 investment with no additions along the way. It makes it easy to compare apples to apples with different rules/tests. That said, I think dollar cost averaging is a good way to go about contributing to investments. Anything that helps with discipline to save every month, and remove some of the uncertainties with investing is a big help!
It seems like the first strategy "buy and hold" still largely outperformed simply buying and holding SPY. Although it didn't fully recover from it's peak, it's still way ahead overall. Am I missing something here?
You're right. It did crush the SPY - right up until 2018 at which point there were crazy ups and downs but from the period of 2018 - present day it actually hasn't appreciated very much on a buy-and-hold basis. The market did see an epic bounce in March 2020 which makes it look like no big deal in retrospect. The way I look at it is by asking myself if I could handle a -52% drawdown. For me personally, the answer is no so I would not want to buy and hold. I think most people probably couldn't realistically handle a -52% drawdown unless it was a small portion of their portfolio. The point I'm trying to make in the video is, buying and holding leveraged ETFs long term just isn't a viable strategy for anybody trying to build a sizeable nest egg because they just crash too hard. It's also important to note we haven't really seen a prolonged bear market since UPRO launched in 2009 (right after financial crisis). Something like dot com era would totally annihilate UPRO.
@@TactileTrade I am handing the 80% drop in SOXL right now. It’s demoralizing. But I’m selling calls on my position and holding. I just can’t eat these losses. Hoping the premium from calls will cancel out volatility drag until it recovers
@@bidmcms3 It's rough out there.. Covered calls are tricky in a drawdown on the underlying shares because your max gain is capped until the call expires. I can't give investment advice, but I'd adopt a long term mindset if you want to HODL and try to sell the calls on big green days to get the strike as high as possible. Covered options are a great tool, but I try to only sell puts when the underlying is already down big, and on big red days, vice versa for covered calls on big green days. Covered calls aren't great for wanting to participate in the long term growth of a stock, they should be viewed as a yield generator. In this market: small position sizes, defined risk, stop losses, plenty of cash!
@@TactileTrade that’s good feedback. Thank you. I just went too heavy too soon, in hindsight. I was in cash until the QQQ was down 15%+, but I never we’d fall this much farther down, this fast. I mean wow
@@TactileTrade I thought each rally we’ve had would be bigger, and each level down would be more gradual. Live and learn. I’ve come away from this seeing our markets really are dictated by the Fed more than anything. The decade long bull run, 2018 dip and rip, and the covid V-shape recovered. It was all Fed. Had I known, I would have gone to cash in January and just stayed away all year
Thanks for the video. One of the most helpful videos on the topic that I have found! Have you ever considered trying to exploit & profit from this volatility decay? take short (or inverse etf?) positions?
Glad you liked it! I wouldn't say there's necessarily something in the leverage decay that can be exploited, it's more just a math/compounding disadvantage built in to leveraged ETFs. The kind of trade that comes to mind when trying to think of a way to exploit this would be something directionally neutral like an iron condor, but doing anything directionally neutral on a 3x ETF is definitely a terrible idea. Perhaps something like a covered call would be viable although capping maximum gain on a leveraged ETF kind of defeats the purpose of using leverage. I don't really get into the inverse ETFs, I'd rather use a LEAPS style long put to go short.
@@TactileTrade I subscribed to your mailing still but still waiting to receive instructions to enroll. Do you have any update on this? Keep up the good work!
@@segura9 Thanks for joining the mailing list! I can see your email has been added to the list. As of this month, I'm actually not doing the daily subscription service anymore. I gave everyone the choice of a refund of 2022's subscription fees paid or a unicef donation. It just came down to a personal/business decision and I've chosen to take the blog in a different direction. I know I mention the service a lot in my videos so my apologies for that! For the moment, I'll be building the free list (that you subscribed to) and sending out infrequent messages when I upload a video, put out a new blog post or have other info to share I think might be valuable to the community. If you'd like, feel free to email me if you want to chat more eli(at)tactiletrade.com
@@TactileTrade sorry to hear. FWIW I would still pay to have access to your sentiment indicator in case you plan to keep it going. I know many would as well. Best.
If the benchmark is the s&p500 and the buy and hold beats that (crushes that) in your example why do you keep saying "it's out"? Yes it decreased at one time 77% but you beat the market.
Yes this is something that I don't understand either, If in the long run it beats the S&P 500, why get concerned about the potential losses if you don't sell?
Yes, being a contrarian is generally a good strategy - "buy when there's blood in the streets" like Warren Buffet says. Although the purpose of the video is tactical asset rotation using leverage, which isn't the same as buy and hold investing. But yes, waiting to get an extreme reading on high volatility / low sentiment could be a good entry point for a long term position, or selling a put!
From 1885-2024 a triple leveraged S&P 500 would have returned 9.26%pa with a 99.91% max drawdown while unleveraged S&P 500 would return 9.54%pa with a max drawdown of 83.65. Circuit breakers were introduced to the S&P 500 in 1988. And while from 1989 a x3 S&P 500 would return 14.05%pa vs 11.12%pa, it would suffer a 98.31% drawdown compared to 55.13% for unleveraged. Imagine seeing $100,000 turn to $1690 within a year.
Except pretty much no one invests once in an index fund when they are young and then never reinvests and holds for like 50 years until retirement. Compare the performance of a monthly or even yearly savings plan (which serves as temporal diversification) and youll see a gigantic performance difference. Besides that, your 100.000$ in the unleveraged S&P 500 would have been multiple millions already at the start of each financial crisis in the leveraged product. It also probably would not have taken genius level intellect to leave the market somewhen before your money turned to nothing or even leave before losing your edge on unleveraged S&P investment. And yes, it obviously still holds a way higher risk, thats the nature of leveraged products.
i recreated your vix strategy within the same timeframe on the same underlying and get completely different results. way less profit %, way lower sharp ratio. something is off here...
So did I. I got way higher drawdowns using the Vix strategy than simply buying and holding. And I went back and calculated every buy and sell manually, just to quadruple check. In the recent market after this video was made, I calculated over an 80% max drawdown with the Vix strategy vs 63% with the buy and hold. Not sure how he got his drawdown and avg return numbers. Wondering if he actually got up close with the numbers or just put it in some back test calculator. Either way, I’m very confident it’s incorrect
Ive been hilding Gush for like over 3 years now is this safe?its Levereged.i purcheses this stock before they Levereged.I cant seem to wrap my head around this🤔Heeelp...
I feel the timeframe you analyzed gave the 200 day ma a hard time. Most of the downturns were sudden crashes without time to react. It would do far better during times like 2008 and 2022 during the slower falls.
How come the 200 day sma strategy only returned 18.5% and had such high volatility and big drawdowns from 2010-2020? I read in the research article that the strategy has averaged 26% since the Great Depression, yet 2010-2020 was a phenomenal bull run in market history so I don’t understand the reason for the lower than average returns and high volatility
It did great until about 2018 where it started to run into trouble - some sizeable drops in the market, shorter trends were I think the problem. One issue with using moving averages alone I've found is depending on where the stock sits in relation to the moving average can have a big impact on how quickly you get a sell signal. For example, in Feb 2020 the S&P was about 9% (if memory serves, I think I mentioned this in another comment) above the MA200 line, which means it dropped by about 9% before giving a sell signal. Of course, other times would've been different, so it kind of depends on what the previous 200 days looked like in a sense, which I don't think is a very robust way of approaching it.
@@TactileTrade Okay that makes a lot of sense now, I see how the MA could have trouble filtering out volatility considering its a lagging indicator based on past performance. The Vix looks much better at filtering out future volatility. Still learning how to put together multiple indicators for a clearer picture like how you did with the MSI. Good thing I saw this video before implementing the 200 day sma strategy by itself!
Any liquid options market will always take into account everything known about the underlying. In the case of a leveraged ETF, the fact that it will have a beta of 2x or 3x an equivalent non-leveraged one will be reflected in the option's premium. It kind of depends how you look at it. Yes, you can make or lose a lot more trading options on leveraged ETFs because the underlying is more volatile by design, but the options themselves still behave the same as standardized option contracts on any other ETF. It's just the fact the underlying is so volatile, that is reflected in the premiums, and how much potential there is for gain or loss as a result.
Rather than either Buy and Hold ("Hope and Pray") or day trading, why not swing trade bull and bear 3X ETFs? Use SPXL and SPXS bull and bear pairs. Always in the market on the winning side whether the market is going up or down. I would appreciate your comparison of systems and indicators that would do this. Thanks!
Easier said than done. I've yet to backtest a system that can reliably short equities or use a bear ETF. The backtests in the video are essentially a form of swing trading as the trade duration is anywhere from 1 day to several weeks or months, depending on the signal. I wouldn't hold SPXL and SPXS at the same time because they'd cancel each other out and be inefficient. You have given me an idea for a video though - different ways to short equities. I added it to the list, for when I eventually start making videos again, thanks :)
@@TactileTrade What I actually had in mind was to trade UPRO as you describe, and when exiting go to SPXU rather than cash. When the market is in a bear trend as it has been for most of 2022, you would be making profits rather than sitting on idle cash.
@@hmf130 Ah I see! The tricky thing is unless it's a bear market (like now), SPXU has a headwind because of beta-slippage, roll yield in the underlying instruments it holds. Not out of the question, but something you'd want to test thoroughly. I'm sure if I swapped it in for this test, and isolated only days when the tests were in SPXU, the net return would have been negative given the bull market so in most cases, cash is just better
I think 3x leveraged etfs have too much risk to be viewed as buy and hold long term investments. I think they should be exclusively: buy and hold until it works investments, which it should eventually. It's a long term investment exclusively for young people and exclusively to make small gains over the S&P 500. Once the 3x leverage beats SPY by a couple percent on a annualized basis you sell, this could take 20 or more years but should eventually happen.
The directional bias is the same as holding shares, just a different way of achieving it. Stock replacement (buying long-dated, deep ITM) is the best way to go about it if the holding time will be longer than a few weeks IMO. Shorter-dated OTM calls will have no intrinsic value and theta decay will eat away at them way too quickly. Stock replacement will behave more like shares (lower theta, higher delta). "How" (shares vs. options) is less important than "When" (trade signals). UPRO options aren't very liquid anyhow so probably not the best for active trading
Wow. Thanks for the comprehensive reply. Because soon there will be at least 2 large price movements on the UPRO, I will go with UPRO options. I only worry that if they are not very liquid, then I will have trouble selling them back to close. I will not use a stop loss as it might get taken out by volatility.
@@TactileTrade I saw that in another thread. It’s a shame you don’t seem active anymore. I enjoyed listening to your presentation and would have loved to work with your tools.
2x Nasdaq - I'm personally not holding leveraged equities at the moment given the current environment. In the context of the video, I like 2x ETFs because they're a decent balance between using leverage & managing the risk. The strategy should be fundamentally valid i.e. still work with the regular ETFs, and then adding leverage should almost be an afterthought. If it relies on leverage to beat the benchmark, then it's probably not a good strategy
I think DCA is just a good practice in general - we want to contribute to our investments regularly. That alone isn't a strategy, it's just a contribution plan. The bigger question is how can we benefit from leverage without being caught in those big, big drawdowns
It's a combined reading of several stock market signals I calculate in my spreadsheet every morning. Beginning in a couple weeks, I will be sharing it with my mailing list daily.
@@deepeshpatel26 There is. Along with the index, I will also be sharing signals for my leveraged ETF strategy and option trades. The details are on my website: www.tactiletrade.com
What about longer timespans? Like from 2000 or even earlier? I've seen the 200 day method multiple times now. there is also a paper on that. Your suggestions might look better, but how can we proof to be sure? Especially the last few years were perfect, even for buy and hold. So for me it would be nice to see longer periods of this and maybe an excel to check myself.
I haven't tested further back. My guess is the VIX method would still hold up pretty well (although it changed in 2003 from S&P 100 to 500 options, so it wouldn't be a similar comparison). Some of the data in my MSI didn't exist back then so it couldn't be tested. I agree with you that the last few years have been really good for buy and hold but I'm convinced to have success with leveraged ETFs in the long term there needs to be some kind of trading rules which is why I made the video :)
my VIX backtesting from 2011-01-03 to 2023-07-12 showed 9x vs 15x with buy and hold but with much less volatility. For example in COVID panic UPRO went down 75% while in VIX tactics it was like 18%. Looks like this strategy is extremely good for unexpected changes of trend but when change is slow it keeps buying and selling cheaper, so it would be nice to combine it with some indicator which will pretend this behavior. @TactileTrade how do You think?
For the vix < 25. Are you suggesting any time the daily price moves above $25, you sell And move to cash? Seems like it’s been below that since early November
That's exactly right for the backtest - whenever VIX closes above 25, it exited UPRO, and vice-versa. However, I'm not suggesting anybody follow this as a strategy as it's far too basic using only one indicator. One look at the drawdowns on the chart should confirm that. I just wanted to illustrate that there are better 'filters' for avoiding volatility decay in leveraged ETFs than moving averages. And yes the VIX has been below 25 for a little while now, although not far below it. The last reading above 25 I captured was on November 6 - granted I capture readings for my strategies every morning at around 11:30AM EST so I'd have to double check closing/other intraday prices. Hope you got some value out of the video and thank you so much for commenting :)
@@TactileTrade that’s very helpful, thanks for clarifying. This opens up a new category, but I wonder how things would look if you combined these factors (ie. 200 Day MA and Vix)
@@geraldwaer3698 That is the key! Combining indicators together to use in a system is the best (and really only way) to trade effectively. I haven't looked at 200 Day MA and VIX specifically mostly because the video would be way too long. But it sounds like you're on the right track!
It's something I calculate every morning in my Excel spreadsheet using the percentile ranks of about 20 volatility and momentum data points. I threw it in there to illustrate how combining multiple indicators is the best way to filter out noise.
@@TactileTrade I hope you realize that the free tradingview has market sentiment gauges for every stock, you spending hours writing an excel spreadsheet every morning using 20 points is an insane waste of time lmaooo especially since tradingview has way more than 20 indicators in its market sentiment gauge so check that out lol.
@@brandonsballing826 I appreciate the tip and I do use TradingView on a daily basis. Many indicators that go into my index are proprietary and can't be found on other platforms. I also wouldn't say being close to the numbers is ever a waste of time as long as the system is working.
It's a proprietary ranking system I built with about two dozen indicators. It has many inputs but a some of them are the Volatility Risk Premium, VIX futures, VIX indices, bond yields, various correlations, short term beta readings, and momentum indicators like moving averages. It works primarily by ranking today's readings in relation to historical data.
How are leverage etfs taxed? Ive heard that even if held forna year they are taxed as short term gains because the fund rebalanced everyday. Is that true?
I can't offer much help on tax because it varies by jurisdiction and I'm not an expert on tax. I think what you need to watch out for are capital gains distributions. Simply holding units of an ETF shouldn't trigger any tax events - although they are used for short term trading. Short term trading always means more turnover in your trading account.
I guess this could be considered swing trading, as trade duration lasts from a couple days up to a few weeks. It's just using indicators that in my opinion are more reliable than basic technicals like MACD, RSI, etc. Although in 2022 all the rules are out the window as even the VIX hasn't been a great indicator due to the volatility response being lacklustre and the market selling off in short fits rather than a big crash.
You said that you would lose 77 percent of your money and that that was a deal breaker but that’s not true.If you just waited for the market to recover and didn’t sell you wouldn’t lose anything. If you buy and hold long term the vast majority of the time it will outperform the regular funds.
Think about it in practice. If you saw your account down 77%, would you actually stay the course or pull the plug? What if that's 1/4 your life savings? Be honest with yourself. Most people think their risk tolerance is a lot higher than it is. Leveraged ETFs aren't buy and hold investments. It says right in SSO's prospectus "investors should actively manage and monitor their investments, as frequently as daily".
@@TactileTrade I only invest money that I am able to lose and if I saw my account down 77% why would I sell?I would just wait until the market goes back up like I have always done. I have actually invested in a 3 time leveraged etf like these before the 2022 crash and I have not sold. I have done the opposite and bought more because I understand that with these leveraged etfs the lows are a lot lower but their is a great potential for return. I would actually be happy if my account was down such a substantial amount because that is a great buying opportunity and I would have a great chance of making a lot of money. Even while these funds may not be intended for long term use they have been back tested decades back and they would always go back up.
RSI is relative strength index, a commonly used technical indicator that measures magnitude of recent price movements. MSI is something I created myself in excel using technical, volatility, and correlation data
@@TactileTrade Thanks for your answer! I was looking for MSI on TradingView and around the internet but couldn't really find anything, so that makes sense. Curious if you would ever write that into code to create an indicator on TradingView?
@@mattlopez9351 at some point I might! I’ve been working on my Python skills for making more interesting RUclips content and might take a stab at automating it at some point! It requires less commonly used data like CBOE indices, VIX futures which makes it challenging
If I buy 100 shares of stock for $10 my cost is $1000 and my max risk is strictly limited to $1000. If I buy 100 shares of a 3x leveraged ETF at $10 my cost is $1000 and my max risk is strictly limited to $1000 I am not trying to compare a stock to an ETF but my question is this : What is incorrect about my statement?
I'm not sure I fully understand what you're asking. Yes, you're risking $1000 in both cases, but it's not the same level of risk. With the 3x ETF, you'd lose the $1000 3x as fast in a serious crash, perhaps compounded if over more than one day.
@@TactileTrade You got it right, that was my question. some of the info you find on Leveraged ETF's make it sound like you are trading a leveraged position and you will get a margin call and lose more than your original purchase. I feel the descriptions do a weak job of fully explaining these instruments. I did have a stock go from $10.70 to $0.50 for me in one day so from a certain point of view Leveraged ETF's being more 'risky' is true but not always 100% of the time.
@@chriscapablanca3491 True you won't get a margin call which is an advantage versus buying 3x shares so in that sense, leveraged ETFs have an advantage
UPRO is a leveraged exchange-traded fund (ETF). It uses derivatives to “track” the S&P 500 index with a factor of x3. For example, if the S&P goes up by 1%, UPRO will go up by 3%. The most important thing to know is this x3 factor is reset daily, which means over the long term UPRO’s performance will differ a lot from the S&P and might not actually be higher if there is a prolonged decline in the S&P.
Couldn't tell you.. I can't give investment advice so it's tough for me to answer that. I don't think we should expect much performance from equities until these interest rate hikes stop. I'm of the opinion central banks won't hike them all that much more despite the rhetoric - or at least they might slow the pace. It'll just do too much damage without even addressing all the root causes of inflation. I think there will be more optimism once that happens. If the position isn't a big chunk of the portfolio, I'd probably just hold at this point (if I were in a similar position, again not investment advice). Just be aware it'll take an awfully powerful, sustained uptrend to recover given the nature of leveraged ETFs and how they rebalance daily. Even if the Nasdaq climbs back to all time highs, depending on how it gets there TQQQ might not. Good luck!
@@TactileTrade When QQQ wil reach the highest point of the past TQQQ won't do the same but TQQQ will recover (like it happened in the past) although it may take 3 to 5 years
I decided not to show it because when I first started out, of course I didn’t have any followers :) I kind of set this goal to keep it hidden until I hit 1k. I’m at 622 right now so hopefully it won’t take too long!
Thanks for your interest! Be sure to check your spam filter because sometimes emails tend to end up there. Especially with outlook.. I can see you're on the list though, so you've secured your spot!
With any leveraged ETF, you should decide if you want to own the underlying first, and then leverage it. So the question becomes: do you want to buy the Dow 30? If yes, do you want it at a 3x leverage? For me personally, I'd probably wait until a bit of a market correction because many of the companies in the Dow are manufacturing based and thus more sensitive to the effects of inflation. I don't think inflation is going to be a huge problem but if the market does, then it becomes a problem for our stock investments. I just try and be positioned for whatever the prevailing sentiment is on a given day or week.
The 200ma approach comes from a seeking alpha article. He also mentions you should get in longs when the price is 1% above the 200ma and sell the position when it's 1.25% below. As for DD, I don't remember. That way you take away some of the losses. have you implemented that in the backtest? He claims it gets 16% more than the market, meaning about 24%-26% on average. Also if you try it, it might be interesting if you try to play with that range of 1% and 1.25% for optimal results and see how good it could get. Also how about combining your 2 of or all 3: your market meter, VIX under 25 and 200ma?
Playing with percentages above and below the MA would be interesting - I haven't tested that kind of modification to it. The thing I don't like about moving averages is sometimes they're just too slow moving to be actionable, depending on how close or far the price is from it and a little bit inconsistent as a result. What I mean by that is, if SPX is very far above it when a big crash first begins, it can take a long time for it to breach the MA where a lot of damage is already done. A good example is Feb, 2020. Just from eyeballing the chart in ToS, SPX dropped from ~3375 and didn't breach the 200ma until ~3040 - about a -9% drawdown already. Using a shorter term MA isn't a solution because it just makes for more noise. I've gotten the best results with indicators that compare similar metrics across multiple time horizons (ma crossovers, shorter and longer term Z-scores, term structures, etc) as well as ranking things in relation to their historical readings. One thing worth testing would be your % adjustments and possibly having them dynamically adjust to make the 200ma more or less sensitive depending on duration of trend, or something of the sort. It could be prone to overfitting though. Regarding combining VIX, my MSI and 200ma, I've found combining indicators to be tricky because whichever produces the most dominant/frequent signals can 'cancel out' or mask the others.
@@TactileTrade I see what you're saying. I mean, it already outperforms the S&P500 with not a huge DD so in that matter if it's this or that for someone I think it's this strategy, don't you think? Do you have any long term strategy you prefer better?
I'd say to an extent yes, the 200ma probably will avoid most of a recession and improve a little over the baseline 'HODL'. The nice thing about moving averages is they're easy to follow and understand. In terms of long term strategie(s) I like better, I don't mean to be a plug but I am fond of my own SmartLev strategy that rotates between SSO/IEF or cash using a bit of everything I mentioned above :) I prefer 2x SSO to 3x UPRO because I think it is a good balance. While it has underperformed my benchmark a little since I started using it in February and hasn't been battle-tested yet in a true crash, I'm quite confident in it going forward based on all the research I've done.
I wouldn't recommend it. The way long-vol ETNs like UVXY are designed means they will decay over the long term. Buying and holding UVXY/VXX will result in losses, it's almost guaranteed. Just look at the 10 year chart of either one. I would say UVXY isn't even a good hedging tool. Volatility does has a long term negative correlation to equities (about -72%), but that doesn't necessarily mean UVXY will moon just because stocks go down. Volatility needs to be 'accelerating' for UVXY to consistently go up, with the VIX futures in backwardation + negative 'roll yield'. You did give me an idea for a video though! Perhaps I will show a backtest of this. So thank you :)
What has been your experience with leveraged ETFs like UPRO? I'd love to know!
I bought and have held a combination in a separate account 55% UPRO with 45% TMF. TMF historically acts as a counterbalance to the downswings of UPRO. I started in Feb 2019, and have held the entire time, rebalanced quarterly, my total return is 155%. Check out this Bogleheads thread (there are 2 long ones) for details on the strategy and reasoning.
Part 1: www.bogleheads.org/forum/viewtopic.php?f=10&t=272007
Part 2: www.bogleheads.org/forum/viewtopic.php?f=10&t=288192
The original poster in that thread is no longer an active member of that forum, so the chart doesn't get updated anymore. There are many of us who continue to invest in this strategy; a lot with different variations of it as well.
@@kevinbandy249 Interesting! I personally will stick to using leveraged ETFs as tactical/actively managed investments because of my risk tolerance level. But 155% over just shy of two years is very solid performance! If you don't mind me asking, how did it perform during Feb/Mar of 2020?
@@TactileTrade Check out the Part 2 link in my comment above. You'll see the chart with the last update from the person who started that thread there (he no longer updates it). It fell down to the original investment balance (no added contributions by the way - just a lump sum investment in this strategy). But obviously, it way more than made up for it since.
Portfolio Visualizer shows that this strategy returned 66% for 2020. The drawdown in Feb/Mar was only 13.5% vs 19.6% for S&P 500... :)
www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2020&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=100000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=3&absoluteDeviation=5.0&relativeDeviation=25.0&showYield=false&reinvestDividends=true&benchmark=VFINX&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=UPRO&allocation1_1=55&symbol2=TMF&allocation2_1=45
@@kevinbandy249 Took a look at it, good stuff! Drawdowns seem to be a bit more frequent, but that's the trade off with a 35% CAGR
@@TactileTrade Instead of buying UPRO , how about selling short SPXU !!!
You'll be surprised when you do the math.
"35% annualized return, that's great" is a MASSIve understatement. that is unbelivable
It's world class, but past performance is no promise of future returns as we saw in 2022!
@@TactileTrade it’s returned an annualized 31% since inception now after a 52% drawdown this year. I’ll still take that lol
@@louisvuittondonvg9040 To each their own but for me personally, a 52% DD is not acceptable. People underestimate what it actually feels like to lose half their investment.. If it's a small part of a portfolio, sure but if we're talking about someone's like savings, it's a different story
Yeh and he was like 41% drawdown is too high? Lol what is he managing fucking 10 billion family office? In your wildest dreams anyone offered even 20% would be insanely lucky. Buffet achieved 20.5%
This was the most fair video I've seen on leveraged S&P500 ETFs so far
I’m glad you liked it! I felt compelled to make it because I’ve seen lots of videos on RUclips talking about just buying and holding leveraged ETFs. This has worked out great since the March 2020 bottom of course. But during the next recession these ETFs are going to get annihilated and I’m concerned investors are getting overly complacent.
Since inception in 2007, qld survived the bear market of 2008-2009, the rough market of 2017-2018 and the 2020 COVID-19 pandemic crash. Since inception qld annualized return is 24%. Buying and holding qld for the past 15 years (even during the crashes) would have been a success. If it survived and rebounded from 08 and 2020, it has been « battle tested », chances are that it will do the same for the next 15 years. Buy and hold can work. And if you just keep on investing in it month in and month out, you could really grow your wealth massively in a decade or so. My 2 cents based on historical and empirical data. Thanks for the video. It was great.
Yeah QLD has done quite well especially post-March 2020. This is of course due to tech's stellar decade. I'm sure tech will continue to dominate into the future too. Any leveraged ETF will still result in some pretty serious drawdowns from time to time though. The point of the video is to try and come up with a system that can avoid a situation where you find yourself in one of those drawdowns and end up waiting years to get back to breakeven like in 2007 - 2010 for QLD. Glad you liked it and thanks for your support!
What’s so bad about draw downs? Couldn’t you just buy more when it’s cheaper and hold it till it spikes back up which is always seems to do and then sell it at its high point?
@@jaimevaldez3586 exactly my point. Drawdowns should be not “much” of a concern if your time horizon is 10+ years. Emotionally it can of course be taxing to see a huge drop in the position. Instead of selling, that makes an excellent opportunity to start averaging down during the crash period and add little by little, like in Feb-April 2020.
Also, in an extremely volatile leveraged index, buying ONCE and hold is a bad idea. There must be an investment plan in place that buys a certain amount EVERY TWO WEEKS for at least 10 years. Because if you e.g. buy a big lump sum at the high of 2021, the crash will be severe and it takes YEARS for your to make a positive return from that point.
Drawdown matters if you are a day/week trader and need to sell your position. I also think that for long-term, a 2x leverage index is more suitable than a 3x one. Also investing in any leveraged ETF other than big major indices (like s&p and nasdaq) is a terrible idea. Many of these ETFs have been wiped out. At least with s&p we’re almost certain that the trend is upwards in 10 years from now and the value will be significantly higher.
At a 10% fixed annual rate of return, your money doubles every 7 years.
I currently dollar cost average quarterly into $UPRO. My time horizon is 15+ years. Am I throwing away money??
Investors: "Leveraged ETF are risky"
Also Investors: "Let's ride GMC and AMC to the moon!"
The allure of meme stocks is hard to ignore. Hopefully at least more people will be steeled for when the next big market crash happens, since they'll likely be accustomed to big drawdowns already! Those who've just bought TQQQ and sat on their laurels might be in for a bit more of a shock
@@TactileTrade Yeah, those who bought TQQQ when it's high.
Even if that's the case, it really wont matter if you dont panic sell when it's low.
The problem with most investors is that they buy high and sell low instead of the other way around.
Selling covered calls/iron condors to collect some premium on these ETFs and using the premium to buy additional shares when prices dip (say by 30%) works well. Buy low sell high always works. Imagine how many additional shares one can buy when the ETF is down 72% and the subsequent LIFTOFF
Exactly. Just look at TQQQ/UPRO when S&P hit 200EMA weekly in 2022 early 2023. Gains would have been MASSIVE. (I have it in my portfolio, biggest mistake is that i don't have TQQQ and that it is a small sum)
Eli, I wish we could get an update on the performance of your asset class rotation strategy in the past few years in these market conditions. I can imagine the past 6 months your portfolio has done quite well 😂
New to investing! Glad I found your channel. Subscribed!
Any books or channels you recommend to learn more?
Thanks for the support and taking the time to watch, glad you got something out of it! I don't really read books on investing, I just started out with index funds, and then began learning about options, volatility and how they affect equities and vice versa. Mostly from scouring the internet and many many many hours in Excel and later QuantConnect / Python.
Accumulate under 200 day by selling puts and run a covered call campaign full time. Start at a 30 delta and sell in 2 dollar increments down in price. Same for covered calls to the upside so you don't limit the upside by as much
Buy and hold
Buy the dips
I don't see the problem with volatility. There is an easy and time tested way to bring volatility down: fixed income and rebalancing. You can get whatever risk/reward you prefer by throttling the degree of fixed income investments you have. When you rebalance, you use some of that fixed income to buy more shares when the volatile thing gets slammed, and sell shares when it's riding high to take profits. If UPRO is more volatile than S&P 500, that just means you need more fixed income to get the same results and you still come out ahead.
May you share the website or tool that you used for creating a strategy like "If Market Sentiment Index (MSI) < 75%, go long on UPRO, otherwise stay in cash".
I think 55%UPRO 45%TMF is a better choice.Rebalancing quarterly and only
use this strategy during low inflation will get a higher sharp ratio.
I just have a hard time convincing myself to hold 3x leveraged 20+ year treasuries when rates are slated to go up. Just my take on it though!
@veryslyfox Yep it's been a rough stretch for leveraged equities!
Hi,where can we access the marker sentiment index?
You could always lower your exposure by buying a Futures to hedge your leverage. Bring yourself down to 2x Leverage vs 3x.
You could, or just use SSO instead :) that's what I do in my strategy
Im using buy and hold which I started in May 2024. It is up 23% 15 June 2024.I use stoploss set at trailing 10%. There isn't much risk as the position will close automatically with big dips.
Now that interest rates are High, id use tmf as a hedge.
What source did you use to get your Market Sentiment Index?
*push*
The best strategy is to stick to a percentage of your portfolio to leveraged ETF and rebalance every quarter to a non leveraged product. Just stick to the percentage so you average down in a bear market and sell in profits in a bull market. 20-30% seem fine to me and selling when hitting 40-50% to get back to your initial 20-30%.
I think leveraged ETFs should generally be used as a tactical/actively managed instrument but of course everybody’s going to have their own strategies.
Check this out (UPRO/TMF strategy)
ruclips.net/video/lwMHuHE9MzQ/видео.html
leveraged ETF as 20-30% of the port?
In the MSI strategy when should we buy upro to hold it till msi reach 75%
this video would be good if you did the backtesting for multiple decades, not just one
@@GreyAndSheep could easily be done, just taking 3x daily returns of SPX.
Love these advanced tips my friend, not part of my strategy, but it can work for others. Good job
GREAT, so where do I find the MSI????
Yeah can't find it either. Maybe we can use CNN Fear and greed index?
I have searched the picture on Google. ONLY his website seem to show up. So 1. ALL other pictures have been wiped from google with this picture (not that likely)
OR 2. He made the picture/indicator himself
Update to my update. He made it himself in Excel. Quote "The MSI is a proprietary index I made in Excel, it isn't available on any trading platform"
@@trollchristianjb1233 Thank you!
How do you feel about entering into a leveraged ETF now because the market has been down almost 30% and an ETF like TQQQ is down 70% and is at a 52 week low. If you do enter now would you still hedge with a leveraged bond ETF like TMF? Thanks!
sounds like hedgefundie excellent adventure, this period of time has been really horrible for leverage because bonds and stocks collapsed in tandem. I do think though some leverage through time is a good strategy and you could do something like NTSX etf which is 1.5x 60/40, vs something like URPO/TMF which you can basically make a 3x 60/40
did you enter the market when you left that comment? If yes how rich are you lol ?
Thanks for this video! Most other videos assume buy and hold and fail to acknowledge that despite decay and drawdowns, there's some serious outperformance to be had here. But mainly, they neglect to take into account the power of these products if you have a protective strategy for downturns in the market.
Couldn't have said it better myself :) I'm glad you liked it!
Could you do this for TQQQ? Thanks for the video. I didn't know about the MSI strategy.
I would imagine TQQQ would be very similar to UPRO but probably a higher return and higher volatility given how QQQ has been over the last decade. Glad you enjoyed the video!
@@TactileTrade I went looking everywhere for that Market Sentiment Index but then read your reply to somebody. Maybe someday you could release it somewhere.
@@Andrew-3445 I actually am planning on sharing the MSI readings along with all 3 strategies every morning with the community via our subscription service starting tentatively in April/May. One of the metrics that go into it is called the 30 Day Volatility Risk Premium. It's the VIX - HV(30). I explain how to calculate it in my video on the VIX index. I will probably share more of the metrics that go into it in the future but the exact methodology of the MSI itself will have to remain my 'secret sauce' as it is essentially the lifeblood of my business as well as a few strategies I am working to deploy with a quant trading fund.
@@TactileTrade I look forward to it. Best of luck with everything.
@@Andrew-3445 Thank you so much for your support :)
Thanks so much for the video. Liked it so much. Can i ask if you've done a test on Dollar cost averaging UPRO for monthly, every six months and yearly? many many thanks.
I'm glad you liked the video! Thank you so much for commenting :) The tests in the video don't assume dollar cost averaging. They just assume a 10,000 investment with no additions along the way. It makes it easy to compare apples to apples with different rules/tests.
That said, I think dollar cost averaging is a good way to go about contributing to investments. Anything that helps with discipline to save every month, and remove some of the uncertainties with investing is a big help!
It seems like the first strategy "buy and hold" still largely outperformed simply buying and holding SPY. Although it didn't fully recover from it's peak, it's still way ahead overall. Am I missing something here?
You're right. It did crush the SPY - right up until 2018 at which point there were crazy ups and downs but from the period of 2018 - present day it actually hasn't appreciated very much on a buy-and-hold basis. The market did see an epic bounce in March 2020 which makes it look like no big deal in retrospect. The way I look at it is by asking myself if I could handle a -52% drawdown. For me personally, the answer is no so I would not want to buy and hold. I think most people probably couldn't realistically handle a -52% drawdown unless it was a small portion of their portfolio.
The point I'm trying to make in the video is, buying and holding leveraged ETFs long term just isn't a viable strategy for anybody trying to build a sizeable nest egg because they just crash too hard. It's also important to note we haven't really seen a prolonged bear market since UPRO launched in 2009 (right after financial crisis). Something like dot com era would totally annihilate UPRO.
@@TactileTrade I am handing the 80% drop in SOXL right now. It’s demoralizing. But I’m selling calls on my position and holding. I just can’t eat these losses. Hoping the premium from calls will cancel out volatility drag until it recovers
@@bidmcms3 It's rough out there.. Covered calls are tricky in a drawdown on the underlying shares because your max gain is capped until the call expires. I can't give investment advice, but I'd adopt a long term mindset if you want to HODL and try to sell the calls on big green days to get the strike as high as possible. Covered options are a great tool, but I try to only sell puts when the underlying is already down big, and on big red days, vice versa for covered calls on big green days. Covered calls aren't great for wanting to participate in the long term growth of a stock, they should be viewed as a yield generator. In this market: small position sizes, defined risk, stop losses, plenty of cash!
@@TactileTrade that’s good feedback. Thank you. I just went too heavy too soon, in hindsight. I was in cash until the QQQ was down 15%+, but I never we’d fall this much farther down, this fast. I mean wow
@@TactileTrade I thought each rally we’ve had would be bigger, and each level down would be more gradual. Live and learn. I’ve come away from this seeing our markets really are dictated by the Fed more than anything. The decade long bull run, 2018 dip and rip, and the covid V-shape recovered. It was all Fed. Had I known, I would have gone to cash in January and just stayed away all year
Thanks for the video. One of the most helpful videos on the topic that I have found! Have you ever considered trying to exploit & profit from this volatility decay? take short (or inverse etf?) positions?
Glad you liked it! I wouldn't say there's necessarily something in the leverage decay that can be exploited, it's more just a math/compounding disadvantage built in to leveraged ETFs. The kind of trade that comes to mind when trying to think of a way to exploit this would be something directionally neutral like an iron condor, but doing anything directionally neutral on a 3x ETF is definitely a terrible idea.
Perhaps something like a covered call would be viable although capping maximum gain on a leveraged ETF kind of defeats the purpose of using leverage.
I don't really get into the inverse ETFs, I'd rather use a LEAPS style long put to go short.
@@TactileTrade I subscribed to your mailing still but still waiting to receive instructions to enroll. Do you have any update on this? Keep up the good work!
@@segura9 Thanks for joining the mailing list! I can see your email has been added to the list. As of this month, I'm actually not doing the daily subscription service anymore. I gave everyone the choice of a refund of 2022's subscription fees paid or a unicef donation. It just came down to a personal/business decision and I've chosen to take the blog in a different direction. I know I mention the service a lot in my videos so my apologies for that! For the moment, I'll be building the free list (that you subscribed to) and sending out infrequent messages when I upload a video, put out a new blog post or have other info to share I think might be valuable to the community. If you'd like, feel free to email me if you want to chat more eli(at)tactiletrade.com
@@TactileTrade sorry to hear. FWIW I would still pay to have access to your sentiment indicator in case you plan to keep it going. I know many would as well. Best.
Where can i see/find the MSI "market sentiment index"?
Theres a ton of fear around Leveraged funds, and frankly I'm happy there is. More for me.
If you can make it work, go for it!
If the benchmark is the s&p500 and the buy and hold beats that (crushes that) in your example why do you keep saying "it's out"? Yes it decreased at one time 77% but you beat the market.
Yes this is something that I don't understand either, If in the long run it beats the S&P 500, why get concerned about the potential losses if you don't sell?
always trust the guy wearing Patagonia 😂
jokes aside, this was really informative!
Haha! I try to keep the dress code informal but I can take a hint ;)
Hey great video, but why didn't you talk about the fees, daily yearly a.s.o
I would think it would make more sense to buy it when volatility is high or market sentiment is low, no...?
Yes, being a contrarian is generally a good strategy - "buy when there's blood in the streets" like Warren Buffet says. Although the purpose of the video is tactical asset rotation using leverage, which isn't the same as buy and hold investing. But yes, waiting to get an extreme reading on high volatility / low sentiment could be a good entry point for a long term position, or selling a put!
From 1885-2024 a triple leveraged S&P 500 would have returned 9.26%pa with a 99.91% max drawdown while unleveraged S&P 500 would return 9.54%pa with a max drawdown of 83.65.
Circuit breakers were introduced to the S&P 500 in 1988. And while from 1989 a x3 S&P 500 would return 14.05%pa vs 11.12%pa, it would suffer a 98.31% drawdown compared to 55.13% for unleveraged. Imagine seeing $100,000 turn to $1690 within a year.
Except pretty much no one invests once in an index fund when they are young and then never reinvests and holds for like 50 years until retirement. Compare the performance of a monthly or even yearly savings plan (which serves as temporal diversification) and youll see a gigantic performance difference.
Besides that, your 100.000$ in the unleveraged S&P 500 would have been multiple millions already at the start of each financial crisis in the leveraged product. It also probably would not have taken genius level intellect to leave the market somewhen before your money turned to nothing or even leave before losing your edge on unleveraged S&P investment.
And yes, it obviously still holds a way higher risk, thats the nature of leveraged products.
i recreated your vix strategy within the same timeframe on the same underlying and get completely different results.
way less profit %, way lower sharp ratio. something is off here...
So did I. I got way higher drawdowns using the Vix strategy than simply buying and holding. And I went back and calculated every buy and sell manually, just to quadruple check. In the recent market after this video was made, I calculated over an 80% max drawdown with the Vix strategy vs 63% with the buy and hold. Not sure how he got his drawdown and avg return numbers. Wondering if he actually got up close with the numbers or just put it in some back test calculator. Either way, I’m very confident it’s incorrect
Ive been hilding Gush for like over 3 years now is this safe?its Levereged.i purcheses this stock before they Levereged.I cant seem to wrap my head around this🤔Heeelp...
I see a Like on my comment;But no comment.Are people on this RUclips platform a Mirage???
I feel the timeframe you analyzed gave the 200 day ma a hard time. Most of the downturns were sudden crashes without time to react. It would do far better during times like 2008 and 2022 during the slower falls.
Completely agree. 200MA is not a good indicator to use with leveraged ETFs. It is just way too slow to react.
How come the 200 day sma strategy only returned 18.5% and had such high volatility and big drawdowns from 2010-2020? I read in the research article that the strategy has averaged 26% since the Great Depression, yet 2010-2020 was a phenomenal bull run in market history so I don’t understand the reason for the lower than average returns and high volatility
It did great until about 2018 where it started to run into trouble - some sizeable drops in the market, shorter trends were I think the problem. One issue with using moving averages alone I've found is depending on where the stock sits in relation to the moving average can have a big impact on how quickly you get a sell signal. For example, in Feb 2020 the S&P was about 9% (if memory serves, I think I mentioned this in another comment) above the MA200 line, which means it dropped by about 9% before giving a sell signal. Of course, other times would've been different, so it kind of depends on what the previous 200 days looked like in a sense, which I don't think is a very robust way of approaching it.
@@TactileTrade Okay that makes a lot of sense now, I see how the MA could have trouble filtering out volatility considering its a lagging indicator based on past performance. The Vix looks much better at filtering out future volatility. Still learning how to put together multiple indicators for a clearer picture like how you did with the MSI. Good thing I saw this video before implementing the 200 day sma strategy by itself!
@@brianmarch4219 It's a real mess out there right now, trends are very short or non-existent. Good luck!
Do the options on a leveraged move more than the regular ETF?
Any liquid options market will always take into account everything known about the underlying. In the case of a leveraged ETF, the fact that it will have a beta of 2x or 3x an equivalent non-leveraged one will be reflected in the option's premium.
It kind of depends how you look at it. Yes, you can make or lose a lot more trading options on leveraged ETFs because the underlying is more volatile by design, but the options themselves still behave the same as standardized option contracts on any other ETF. It's just the fact the underlying is so volatile, that is reflected in the premiums, and how much potential there is for gain or loss as a result.
Very helpful video! Thank you.
Glad you found it helpful! Thank you for your support :)
Any chancee you can provide the link for the MSI market sentiment indicator. I know im 3 years late but i can't seem to find it.
Update to my update. He made it himself in Excel. Quote "The MSI is a proprietary index I made in Excel, it isn't available on any trading platform"
Love this!!
Rather than either Buy and Hold ("Hope and Pray") or day trading, why not swing trade bull and bear 3X ETFs? Use SPXL and SPXS bull and bear pairs. Always in the market on the winning side whether the market is going up or down. I would appreciate your comparison of systems and indicators that would do this. Thanks!
Easier said than done. I've yet to backtest a system that can reliably short equities or use a bear ETF. The backtests in the video are essentially a form of swing trading as the trade duration is anywhere from 1 day to several weeks or months, depending on the signal. I wouldn't hold SPXL and SPXS at the same time because they'd cancel each other out and be inefficient.
You have given me an idea for a video though - different ways to short equities. I added it to the list, for when I eventually start making videos again, thanks :)
@@TactileTrade What I actually had in mind was to trade UPRO as you describe, and when exiting go to SPXU rather than cash. When the market is in a bear trend as it has been for most of 2022, you would be making profits rather than sitting on idle cash.
@@hmf130 Ah I see! The tricky thing is unless it's a bear market (like now), SPXU has a headwind because of beta-slippage, roll yield in the underlying instruments it holds. Not out of the question, but something you'd want to test thoroughly. I'm sure if I swapped it in for this test, and isolated only days when the tests were in SPXU, the net return would have been negative given the bull market so in most cases, cash is just better
I think 3x leveraged etfs have too much risk to be viewed as buy and hold long term investments. I think they should be exclusively: buy and hold until it works investments, which it should eventually. It's a long term investment exclusively for young people and exclusively to make small gains over the S&P 500. Once the 3x leverage beats SPY by a couple percent on a annualized basis you sell, this could take 20 or more years but should eventually happen.
drawdown means paper loss of principle ??
Drawdown is the drop from peak to trough, it could be on principle, or principle + accumulated profit
ware do you find this msi chart?
Great video. Keep it up 👍
Omar ABZAHD thanks Omar! It’s been a few weeks since I’ve uploaded a video - got one in the works right now. I appreciate your support :)
Late to the party but curious about buying call options on this UPRO and holding for weeks. I am just worried because of the "reset" every day.
The directional bias is the same as holding shares, just a different way of achieving it. Stock replacement (buying long-dated, deep ITM) is the best way to go about it if the holding time will be longer than a few weeks IMO. Shorter-dated OTM calls will have no intrinsic value and theta decay will eat away at them way too quickly. Stock replacement will behave more like shares (lower theta, higher delta). "How" (shares vs. options) is less important than "When" (trade signals). UPRO options aren't very liquid anyhow so probably not the best for active trading
Wow. Thanks for the comprehensive reply. Because soon there will be at least 2 large price movements on the UPRO, I will go with UPRO options. I only worry that if they are not very liquid, then I will have trouble selling them back to close. I will not use a stop loss as it might get taken out by volatility.
What are you using for the market sentiment index?
It's made up of VIX related indicators, technical indicators and correlations between asset classes
@@TactileTrade I saw that in another thread. It’s a shame you don’t seem active anymore. I enjoyed listening to your presentation and would have loved to work with your tools.
@@akwinas_a_o I have a lot planned for the RUclips channel, just don't have the time right now to make any videos. Thanks so much for the support :)
what is msi? I've never heard of it.
It's a proprietary mix of indicators I originally built a couple years ago in Excel
What’s your take on QLD?
2x Nasdaq - I'm personally not holding leveraged equities at the moment given the current environment. In the context of the video, I like 2x ETFs because they're a decent balance between using leverage & managing the risk. The strategy should be fundamentally valid i.e. still work with the regular ETFs, and then adding leverage should almost be an afterthought. If it relies on leverage to beat the benchmark, then it's probably not a good strategy
How about dca during crashes while still holding longterm?
I think DCA is just a good practice in general - we want to contribute to our investments regularly. That alone isn't a strategy, it's just a contribution plan. The bigger question is how can we benefit from leverage without being caught in those big, big drawdowns
Would you Take also 25 for the NASDAQ VIX for tqqq
I haven't actually done any testing with VXN. It has the same methodology so I wouldn't be surprised if it could be followed with similar rules!
Great video! How do I use MIS? I also tried to subscribe on your website and it wouldn't let me
Guys, can you help me and say where would i be able to track these indicators online?
What is the market sentiment indeed??
It's a combined reading of several stock market signals I calculate in my spreadsheet every morning. Beginning in a couple weeks, I will be sharing it with my mailing list daily.
@@TactileTrade is there a subscription to get it daily?
@@deepeshpatel26 There is. Along with the index, I will also be sharing signals for my leveraged ETF strategy and option trades. The details are on my website: www.tactiletrade.com
What about longer timespans? Like from 2000 or even earlier? I've seen the 200 day method multiple times now. there is also a paper on that. Your suggestions might look better, but how can we proof to be sure? Especially the last few years were perfect, even for buy and hold. So for me it would be nice to see longer periods of this and maybe an excel to check myself.
I haven't tested further back. My guess is the VIX method would still hold up pretty well (although it changed in 2003 from S&P 100 to 500 options, so it wouldn't be a similar comparison). Some of the data in my MSI didn't exist back then so it couldn't be tested. I agree with you that the last few years have been really good for buy and hold but I'm convinced to have success with leveraged ETFs in the long term there needs to be some kind of trading rules which is why I made the video :)
streetsmack is the only guy showing that
my VIX backtesting from 2011-01-03 to 2023-07-12 showed 9x vs 15x with buy and hold but with much less volatility. For example in COVID panic UPRO went down 75% while in VIX tactics it was like 18%. Looks like this strategy is extremely good for unexpected changes of trend but when change is slow it keeps buying and selling cheaper, so it would be nice to combine it with some indicator which will pretend this behavior. @TactileTrade how do You think?
For the vix < 25. Are you suggesting any time the daily price moves above $25, you sell And move to cash? Seems like it’s been below that since early November
That's exactly right for the backtest - whenever VIX closes above 25, it exited UPRO, and vice-versa. However, I'm not suggesting anybody follow this as a strategy as it's far too basic using only one indicator. One look at the drawdowns on the chart should confirm that. I just wanted to illustrate that there are better 'filters' for avoiding volatility decay in leveraged ETFs than moving averages.
And yes the VIX has been below 25 for a little while now, although not far below it. The last reading above 25 I captured was on November 6 - granted I capture readings for my strategies every morning at around 11:30AM EST so I'd have to double check closing/other intraday prices.
Hope you got some value out of the video and thank you so much for commenting :)
@@TactileTrade that’s very helpful, thanks for clarifying. This opens up a new category, but I wonder how things would look if you combined these factors (ie. 200 Day MA and Vix)
@@geraldwaer3698 That is the key! Combining indicators together to use in a system is the best (and really only way) to trade effectively. I haven't looked at 200 Day MA and VIX specifically mostly because the video would be way too long. But it sounds like you're on the right track!
Hey, where can I find the Market Sentiment Index? Thanks.
It's something I calculate every morning in my Excel spreadsheet using the percentile ranks of about 20 volatility and momentum data points. I threw it in there to illustrate how combining multiple indicators is the best way to filter out noise.
@@TactileTrade I hope you realize that the free tradingview has market sentiment gauges for every stock, you spending hours writing an excel spreadsheet every morning using 20 points is an insane waste of time lmaooo especially since tradingview has way more than 20 indicators in its market sentiment gauge so check that out lol.
@@brandonsballing826 I appreciate the tip and I do use TradingView on a daily basis. Many indicators that go into my index are proprietary and can't be found on other platforms. I also wouldn't say being close to the numbers is ever a waste of time as long as the system is working.
@@brandonsballing826 I cannot find marker sentiment indicator on TradingView lol
ETF timing is the Key and this TIME is NOW! Go for 3LNI or 3XPV 🤑🤑🤑I have loaded my bags 💎
Why maximum drawdown even matters except psychologically? I would buy and hold qld and just delete the app and never watch until I retire
Check out 13EMA 48EMA crossover
Buy and hold for 10 years with money you do not need. Thank me 10 years later.
What is your source for the Market Sentiment Index?
It's a proprietary ranking system I built with about two dozen indicators. It has many inputs but a some of them are the Volatility Risk Premium, VIX futures, VIX indices, bond yields, various correlations, short term beta readings, and momentum indicators like moving averages. It works primarily by ranking today's readings in relation to historical data.
@@TactileTrade have you tested its correlation with for example CNN's Fear & Greed Index?
what market sentiment indicator are you referring to?
It's a proprietary indicator I created and track in Excel. It's made up of asset class correlations, volatility and basic price action mashed together
How does a person get this msi index ?
How are leverage etfs taxed? Ive heard that even if held forna year they are taxed as short term gains because the fund rebalanced everyday. Is that true?
I can't offer much help on tax because it varies by jurisdiction and I'm not an expert on tax. I think what you need to watch out for are capital gains distributions. Simply holding units of an ETF shouldn't trigger any tax events - although they are used for short term trading. Short term trading always means more turnover in your trading account.
Why not just swing trade it?
I guess this could be considered swing trading, as trade duration lasts from a couple days up to a few weeks. It's just using indicators that in my opinion are more reliable than basic technicals like MACD, RSI, etc. Although in 2022 all the rules are out the window as even the VIX hasn't been a great indicator due to the volatility response being lacklustre and the market selling off in short fits rather than a big crash.
How about TQQQ?
You said that you would lose 77 percent of your money and that that was a deal breaker but that’s not true.If you just waited for the market to recover and didn’t sell you wouldn’t lose anything. If you buy and hold long term the vast majority of the time it will outperform the regular funds.
Think about it in practice. If you saw your account down 77%, would you actually stay the course or pull the plug? What if that's 1/4 your life savings? Be honest with yourself. Most people think their risk tolerance is a lot higher than it is. Leveraged ETFs aren't buy and hold investments. It says right in SSO's prospectus "investors should actively manage and monitor their investments, as frequently as daily".
@@TactileTrade I only invest money that I am able to lose and if I saw my account down 77% why would I sell?I would just wait until the market goes back up like I have always done. I have actually invested in a 3 time leveraged etf like these before the 2022 crash and I have not sold. I have done the opposite and bought more because I understand that with these leveraged etfs the lows are a lot lower but their is a great potential for return. I would actually be happy if my account was down such a substantial amount because that is a great buying opportunity and I would have a great chance of making a lot of money. Even while these funds may not be intended for long term use they have been back tested decades back and they would always go back up.
@@zacharyfarnsworth2865 If you calculated the scenario of the 2007-2008 financial crisis you would have been down for YEARS.
By Market Sentiment Index (MSI), is that the same thing as the RSI?
RSI is relative strength index, a commonly used technical indicator that measures magnitude of recent price movements. MSI is something I created myself in excel using technical, volatility, and correlation data
@@TactileTrade Thanks for your answer! I was looking for MSI on TradingView and around the internet but couldn't really find anything, so that makes sense. Curious if you would ever write that into code to create an indicator on TradingView?
@@mattlopez9351 at some point I might! I’ve been working on my Python skills for making more interesting RUclips content and might take a stab at automating it at some point! It requires less commonly used data like CBOE indices, VIX futures which makes it challenging
It would be interesting to know how you computed it
@@ulissem6478 If you check out my ETF backtesting with Excel video, I go through step by step how I backtest with Excel!
If I buy 100 shares of stock for $10 my cost is $1000 and my max risk is strictly limited to $1000. If I buy 100 shares of a 3x leveraged ETF at $10 my cost is $1000 and my max risk is strictly limited to $1000
I am not trying to compare a stock to an ETF but my question is this : What is incorrect about my statement?
I'm not sure I fully understand what you're asking. Yes, you're risking $1000 in both cases, but it's not the same level of risk. With the 3x ETF, you'd lose the $1000 3x as fast in a serious crash, perhaps compounded if over more than one day.
@@TactileTrade You got it right, that was my question. some of the info you find on Leveraged ETF's make it sound like you are trading a leveraged position and you will get a margin call and lose more than your original purchase. I feel the descriptions do a weak job of fully explaining these instruments.
I did have a stock go from $10.70 to $0.50 for me in one day so from a certain point of view Leveraged ETF's being more 'risky' is true but not always 100% of the time.
@@chriscapablanca3491 True you won't get a margin call which is an advantage versus buying 3x shares so in that sense, leveraged ETFs have an advantage
WHAT IS UPRO?
UPRO is a leveraged exchange-traded fund (ETF). It uses derivatives to “track” the S&P 500 index with a factor of x3. For example, if the S&P goes up by 1%, UPRO will go up by 3%.
The most important thing to know is this x3 factor is reset daily, which means over the long term UPRO’s performance will differ a lot from the S&P and might not actually be higher if there is a prolonged decline in the S&P.
how this MSI strategy made 450k from 10? My backtesting says its like 38
The MSI is a proprietary index I made in Excel, it isn't available on any trading platform
@@TactileTrade ahh ok, i missunderstood that it is CNN fear greed index. Can i somehow get to know how your MSI index was created?
Liked!
Thank you for your support :)
I bought 30 shares of TQQQ at $73 back in February. Now it’s at $18. Down 1.5k. Do I sell this shit or hope it gets back to 73
Couldn't tell you.. I can't give investment advice so it's tough for me to answer that. I don't think we should expect much performance from equities until these interest rate hikes stop. I'm of the opinion central banks won't hike them all that much more despite the rhetoric - or at least they might slow the pace. It'll just do too much damage without even addressing all the root causes of inflation. I think there will be more optimism once that happens.
If the position isn't a big chunk of the portfolio, I'd probably just hold at this point (if I were in a similar position, again not investment advice). Just be aware it'll take an awfully powerful, sustained uptrend to recover given the nature of leveraged ETFs and how they rebalance daily. Even if the Nasdaq climbs back to all time highs, depending on how it gets there TQQQ might not. Good luck!
@@TactileTrade When QQQ wil reach the highest point of the past TQQQ won't do the same but TQQQ will recover (like it happened in the past) although it may take 3 to 5 years
Why your channel does not show the number of following?
I decided not to show it because when I first started out, of course I didn’t have any followers :) I kind of set this goal to keep it hidden until I hit 1k. I’m at 622 right now so hopefully it won’t take too long!
@@TactileTrade OK
After sign up i haven't receive email confirmation ..
Thanks for your interest! Be sure to check your spam filter because sometimes emails tend to end up there. Especially with outlook.. I can see you're on the list though, so you've secured your spot!
May I ask should one buy UDOW now please?
With any leveraged ETF, you should decide if you want to own the underlying first, and then leverage it. So the question becomes: do you want to buy the Dow 30? If yes, do you want it at a 3x leverage? For me personally, I'd probably wait until a bit of a market correction because many of the companies in the Dow are manufacturing based and thus more sensitive to the effects of inflation. I don't think inflation is going to be a huge problem but if the market does, then it becomes a problem for our stock investments. I just try and be positioned for whatever the prevailing sentiment is on a given day or week.
@@TactileTrade Which stock should one buy please?
@@liberalstudiesmaterials899 If you're not sure or new to investing, always best to go with a broad market index ETF such as SPY, VTI.
@@TactileTrade May I ask which stock will increase rapidly please?
@@TactileTrade Which stock should one buy now please?
SSO and QLD are better for peace of mind
The 200ma approach comes from a seeking alpha article.
He also mentions you should get in longs when the price is 1% above the 200ma and sell the position when it's 1.25% below.
As for DD, I don't remember.
That way you take away some of the losses. have you implemented that in the backtest? He claims it gets 16% more than the market, meaning about 24%-26% on average.
Also if you try it, it might be interesting if you try to play with that range of 1% and 1.25% for optimal results and see how good it could get.
Also how about combining your 2 of or all 3: your market meter, VIX under 25 and 200ma?
Playing with percentages above and below the MA would be interesting - I haven't tested that kind of modification to it. The thing I don't like about moving averages is sometimes they're just too slow moving to be actionable, depending on how close or far the price is from it and a little bit inconsistent as a result. What I mean by that is, if SPX is very far above it when a big crash first begins, it can take a long time for it to breach the MA where a lot of damage is already done.
A good example is Feb, 2020. Just from eyeballing the chart in ToS, SPX dropped from ~3375 and didn't breach the 200ma until ~3040 - about a -9% drawdown already. Using a shorter term MA isn't a solution because it just makes for more noise.
I've gotten the best results with indicators that compare similar metrics across multiple time horizons (ma crossovers, shorter and longer term Z-scores, term structures, etc) as well as ranking things in relation to their historical readings.
One thing worth testing would be your % adjustments and possibly having them dynamically adjust to make the 200ma more or less sensitive depending on duration of trend, or something of the sort. It could be prone to overfitting though.
Regarding combining VIX, my MSI and 200ma, I've found combining indicators to be tricky because whichever produces the most dominant/frequent signals can 'cancel out' or mask the others.
@@TactileTrade
I see what you're saying.
I mean, it already outperforms the S&P500 with not a huge DD so in that matter if it's this or that for someone I think it's this strategy, don't you think?
Do you have any long term strategy you prefer better?
I'd say to an extent yes, the 200ma probably will avoid most of a recession and improve a little over the baseline 'HODL'. The nice thing about moving averages is they're easy to follow and understand.
In terms of long term strategie(s) I like better, I don't mean to be a plug but I am fond of my own SmartLev strategy that rotates between SSO/IEF or cash using a bit of everything I mentioned above :) I prefer 2x SSO to 3x UPRO because I think it is a good balance. While it has underperformed my benchmark a little since I started using it in February and hasn't been battle-tested yet in a true crash, I'm quite confident in it going forward based on all the research I've done.
Day trading these is the way to go.
To each their own! I don’t have the time to day trade which is why I gravitated towards once-daily trading systems
sell them when over 10% buy pack in after dropping 50% and have a positive 10 day sma
anyone try upro..70%...and uvxy...30%..and re-balance bi-weekly..or monthly..thanks
I wouldn't recommend it. The way long-vol ETNs like UVXY are designed means they will decay over the long term. Buying and holding UVXY/VXX will result in losses, it's almost guaranteed. Just look at the 10 year chart of either one. I would say UVXY isn't even a good hedging tool. Volatility does has a long term negative correlation to equities (about -72%), but that doesn't necessarily mean UVXY will moon just because stocks go down. Volatility needs to be 'accelerating' for UVXY to consistently go up, with the VIX futures in backwardation + negative 'roll yield'.
You did give me an idea for a video though! Perhaps I will show a backtest of this. So thank you :)
Why would I like your video before you show me what you have to offer? Weird
None of your strategies work, maintain set percentage, rebalance when off by $500
You are so wrong on so many levels
Such as?
How old are you ? 17 and your giving advice ? omg