Reduction of 32$According to the butterfly pattern, a decline is looming with a target of $ 32, where there will be an excellent point for further overshooting.
UPRO trade ideas
Understanding Leveraged Shares A day ago, I released the " Leveraged Share Decay " indicator for those who trade or invest in leveraged shares. What the indicator does is it tracks the consistency of returns and the rate of decay of a leveraged share against its benchmark. Leveraged shares tend to be seen as "risky" and grouped into the "option-esque" category of trading. From my experience trading them, I would greatly disagree with that notion, as I find it much easier and more enjoyable to trade leveraged shares than to trade options. However, in this post, I want to outline some of the facts of trading leveraged shares and how they work. So, let's get started!
What is a leveraged share?
A leveraged share or leveraged ETF is an ETF that aims to increase exposure to a specific underlying asset. For example, UPRO aims to return 3 times the amount of the S&P. So, in theory, if the S&P were to return 10%, UPRO should return 30% (3 x 10).
How it does this is by using instruments such as options and futures contracts to leverage the exposure to the underlying asset. Of course, this comes with some risks, such as if the ticker goes against you as well as the costs involved in the management and labor of such a task.
Let's take a deeper look at how leveraged shares work by looking at UPRO:
UPRO is the 3x bull leveraged share of the S&P 500. Compared to SPY, it tracks it very well. The average drift (the amount the share may vary in cost compared to the underlying) is about $1 after 10 days, but peaks at a max of around $3 after 252 (1 trading year) days. This means the decay you can expect to experience holding UPRO for 1 year is about a $3 decay per share.
Let's say you entered a UPRO position on January 9th, 2023. At the time, UPRO was about $34.62. Let's say you bought 100 shares at $34.62, for a total entry cost of $3,462. As of today, you would be up 59.28%, or a net P&L of $1,965. If you had bought SPY, you would be up 21.91%.
So let's do the comparison. UPRO is 3X leverage, so we would expect our returns to be 3 X 21.91%. To do this, we simply convert the percentages into a decimal place by dividing by 100, then add. So here is the math:
21.91% / 100 = 0.2191 59.28% / 100 = 0.5928
Assuming that UPRO is 3X spy, we would need to multiply SPY by 3:
0.2191 x 3 = 0.6573 Now convert that back into a percentage by multiplying it by 100:
0.6573 x 100 = 65.73%
So, our expected return should have been 65.73%. However, owing to the decay, it was around 59.28%, with a loss of around 6.45%. This 6.45% is equal to about a $223.30 loss of our initial investment ($3,462 x 6.45% = $223.30). Considering we bought 100 shares, that would be about $2.23 per share, well within the indicator’s prediction of decay.
Now, it's unfair to view this as a loss or "decay" in some circumstances because you are essentially paying for a firm to manage the exposure of the share to the S&P. So this "cost amount" can actually be viewed as a cost of labor, no different than paying a management firm to manage your portfolio for you.
That said, leveraged shares, as investment mechanisms, are only good as investment mechanisms when the markets are good. Let’s take a look at what would have happened if we would have invested in UPRO on March 14th, 2022, during the 2022 bear market decline:
This would be a total of 457 trading days, or roughly 2 trading years.
At the time, UPRO was $52.06. If we did 100 shares at $5,206, we would just be recovering now, vs. us having bought SPY, we would be up 11.90% now:
So what happened here?
Volatility. And this is why, I think, people draw the comparison between options and leveraged shares, because if the trade goes against you for a prolonged period of time and a very dramatic fall, the share is going to decay like mad. What causes this is often referred to as “Beta Slippage.” It is a compounding effect of daily rebalancing in leveraged exchange-traded funds. This happens because, as indicated before, in order to gain the exposure they do, leveraged shares hold derivatives such as options and futures contracts to increase their exposure to the underlying asset.
To understand Beta Slippage, let’s use a made-up example. We have share X, at a value of $40, which has a 2X leveraged bull share, Y, at a value of $8. You buy 100 shares of Y for a total of $800. The next day, X goes up 10%, and your position goes up 20% (2 x Bull). You now have $160 in profit, for a total value of $960. You don’t sell because you believe it will go up an additional 20%. However, over the coming days, X falls about 9.5%. This would translate to a 19% fall on Y (9.5 x 2). If we do the math:
$960 x 19% = $182.4
960 – $182.4 = $777.6
You now have $777.6, which is less than your initial investment. This is the compounding effect.
What if you just invested in the underlying?
$40 x 20% = $48
$48 x 9.5% = $43.44
So, had you invested in 100 shares of the actual underlying, you would still be up $3.44 per share.
The bright side:
The bright side to this is, beta slippage is much easier to account for, track, and calculate with leveraged shares vs options. The phenomenon happens with both instruments, but it's much more nuanced to calculate with options.
When does Slippage show up?
It can show up as soon as the same day if the decline or rise happens starkly and fast enough, but in general, if you are picking a stable ETF like UPRO, it tends to be noticeable at 30 to 50 days:
In the example above, I picked a period consisting of 30 days where SPY was whipsawing like mad. For the most part, UPRO remained fairly stable until day 30 when you can start to see slippage appear. For example, SPY was able to fill the gap (first blue circle) at $447.71, but UPRO failed to fill its gap. SPY then broke above the immediate resistance at $448.71; however, this same resistance on UPRO was not broken.
If we look at the decay tracker indicator, we can see as time passes, not only does the drift in price variation increase but also the slippage increases:
A mention of inverse leveraged shares
I think it’s important to mention inverse leveraged shares. They are viewed, generally, as riskier than bull leveraged shares, and, to an extent, this is true, but not for the reasons you may be thinking. Inverse leveraged shares are victims of the same mathematical and compounding faults as their bullish counterparts, no more and no less. The main risk associated with inverse leveraged shares is the perma-bull thesis, i.e., stocks only go up. And this thesis has proved pretty factual, especially towards the end of 2023.
That said, I have personally held inverse leveraged shares (specifically, SPXS) for roughly 6 months, from April till September during the 2022 decline when I was targeting 350 on SPY. The end result? Some decay resulted, but I still gained just over 40%. There was a little stint where, despite SPY not going up as high as it did before, my position still went red (see chart below):
But quickly recovered. This actually was a wakeup call to always set a trailing stop and take profits when you’re up! I was too confident there. But besides that point, you can see that it did work out holding it a bit longer term.
That said, if we look at SPY vs SPXS using the decay tracker, here are the results:
We can see that there is substantially more slippage on SPXS vs UPRO. Why? Because of the compounding factor. SPY has been in a massive uptrend since October, constantly pushing up and up. This compounds the losses on an inverse leveraged share and increases the slippage with the wild up moves followed by very little pullback. And that is the danger of inverse leveraged shares because you are fighting against a predominant market mantra, ONLY UP, NEVER DOWN.
Alternatives to Leveraged Shares
The only alternative to leveraged shares is for those who are non-citizens of the country whose stock they want to trade (in this case, the USA) who can invest in US equities via CFDs and other currency-hedged stocks. For example, I myself am currently holding MSFT CAD Hedged (TSX:MSFT), S&P 500 Equal weight (TSX:EQL), and NASDAQ 100 (TSX:QQEQ.F). I also have holdings in the US equivalents, but as I build the position, I add to the CAD hedged as it permits me to increase my size owing to the cost difference. These exist in many other countries and do the same thing. However, if you are in the US, they are not available because of tax regulations, so your option is to do the underlying or the leveraged shares.
Let’s just look at MSFT (NYSE) vs MSFT (TSX) using the leveraged share indicator:
Not too shabby, huh?
To find which other countries have a currency-hedged version, simply type the ticker into Tradingview’s search bar, and it will come up with the country flag:
Conclusion:
So, are leveraged shares right for you? Well, that’s a personal question, but I hope that you learned how to assess whether or not a leveraged share is right for you with the information provided.
In general, these are the things you should absolutely, 100% think about before investing (key word is investing, not day trading; investing implies holding for greater than 2 to 3 months) in leveraged shares:
1. The overall decay that has historically happened with the leveraged share; you can use the indicator I released to help you figure that out, as well as some of the calculations I employed in the post (mind you, the indicator does it all for you ;).
2. The expected volatility of the market. You can gauge this by looking at historical volatility indicators and also the VIX. The fear and greed index are also helpful as well.
3. Whether your entry price is good or bad. This is something that comes with time and experience as a trader, but I can give you an example of a bad entry for me and why I chose to invest in MSFT CAD hedged as opposed to the leveraged counterpart NYSE:MSFU:
I entered on that candle. You may think it’s a good entry and perhaps it's not the worst entry, but the fact is, things are pretty over-extended on tech and it could go bad really quickly. A more ideal entry would have been:
There. But alas, you have to work with what is given when it comes to investments most times. Though I can’t complain since I am still holding MSFT shares I bought in 2022 at around $242 haha.
Not all leveraged shares are created equal, some are awful *cough* BOIL *cough*, others are great (i.e. UPRO). Make sure you are checking its historic performance, I cannot stress this enough!!
Also, if you are interested in a deeper look on this subject, @SpyMasterTrades did an excellent video explanation of the dangers of leveraged shares, you can view it below:
And those are my thoughts! Hope you enjoyed; leave your comments/questions below and, as always, safe trades!
P&L Indicator Hello everyone and happy Saturday!
Releasing a P&L indicator. I developed this indicator owning to the lack of integration my brokers have with Tradingview, but the fact that I do all of my charting/trading on Tradingview.
This is a quick tutorial and getting started guide on the indicator which will be posted later today.
Hope you enjoy and let me know your comments/suggestions and questions below!
Safe trades everyone!
PopSeller capitulated. With a higher high despite higher selling volume on the day and the Oscar oscillator continuing to trend higher. Looking for a take profit at the previous swing high.
RSI Trends and Extremes with Color-Fill
What is the RSI Color Extremes Script?
The RSI Color Extremes Script is a different take on the traditional RSI. With a shorter period setting, short-term trends and extremes can be detected.
How is RSI Color Extremes different from the traditional RSI and Connors RSI (CRSI)?
While the traditional RSI is 14 periods, the default setting for this script is 2 periods. The 2-period setting was borrowed from Connors RSI (CRSI) where 2 and 3 periods are used, however, the interpretation here is different. Credit goes to user fikira as this is a different take on his/her original script. The period setting is adjustable.
How to use the RSI Color Extremes Script
When the RSI(2) crosses above the 70 line, this is a buy signal, when it crosses below the 30 line, this is a sell signal. As the intensity of the green color increases this indicates a strengthening of an up-trend. As the intensity of the red increases, this indicates the a strengthening down-trend. Extremes of above 95, (the red dotted line), or below 5, (the green dotted line) are rarely reached and can be viewed as potential reversal points or proactive profit taking.
This script can be used with other indicators (Stochastic, moving averages, or MACD for examples) for confirmation or confluence of indicators.
Settings:
* The default setting is 2 periods
* color intensity increases as the indicator rises or falls
* The period setting is adjustable.
Observations:
* Not all signals lead to major moves. However, all major moves give this signal. it is important to use other indicators for confirmation.
* setting alerts on the indicator (crossing above 70 or crossing below 30) can be a good way to identify early potential trends.
* The script works on any security and in any timeframe.
The period setting is adjustable.
UPRO - Long Term Uptrend UPRO has formed an interesting formation, but has bottomed along the long term uptrend in green
This also aligns with 0.786 fib
Bullish
Visualizing OTM Calls. The malleability of gender during childhood.
Should parents be concerned?
Gender and sexuality have always been difficult topics, especially when it involves parents, children and the education system. Over the past year, these issues have been brought to the forefront by the media and America's social discourse.
However, the discussion and subsequent controversy surrounding gender and sexuality is nothing new. Although challenging, these topics need to be discussed openly.IIn that vein, I would like to share my thoughts regarding the subject matter.
I would like to begin by examining the various acronyms you've likely heard on TV and social media. "LGBTQIA" some of these terms are quite new in the American vernacular and it's important to familiarize ourselves. The L G B stands for gay, lebian and bisexual. These acronyms relate to individuals whose sexual preference deviates from the heterosexual Norm. It has nothing to do with their gender identity. Lesbians are women, gay people are men, bisexual people can be a man or a woman that likes men and women.
T Q I A are somewhat newer additions standing for, transgender, queer, intersex and asexual.
Transgender, queer and asexual relate entirely to gender identity. This puts them in an entirely different category than lesbian, gay and bisexual.
According to Wikipedia, intersex people are individuals born with any of several sex characteristics including chromosome pattern, gonads, or genitals that, according to the office of the United Nations High Commissioner for human rights, "do not typically fit binary Notions of male or female bodies." This place is intersex people in an entirely different category because it relates directly to biology and genetics.
Ask yourself, why has three distinct groups of people been conveniently bulked into the same category? Conspiratorially inference notwithstanding, I honestly don't know.
My concern, along with many conservatives and millions of parents is the well-being of children. The idea of sexual preference being malleable is almost universally condemned by society. We've heard the horror stories of a Teenage young man who happens to be gay getting sent off to straight camp. The gay community has long said, sexual preference is something you're born with. I agree with this assertion.
However, and it's a very very big however, is it wrong to ask if gender identity is malleable to the influences of society? Social progressives have emphasized the difference between gender and sex, let's continue the discussion.
As someone who has worked with children for 20 years, I have a hard time believing gender is something that isn't malleable. Young children are incredibly trusting and impressionable. They mimic their role models and take on their characteristics. A child's personality is incredibly malleable. Remember, the social progressives told you that gender identity is a different subject. Yes, indeed it is
UPRO MACD 13 48 200 EMA moving average downtrend signal UPRO chart is based on 2 hour timeframe
Downward trend MACD signal indicated on 3/30
Potential of 15% downside
This is not financial advice
Caviot Emptor
should reject off this resistance now UPRO pumped to a local resistance zone on friday, perfect short entry if you got in then(not financial advice of course ;), I expect more volatility next week. A gap down and dump to support is a very possible scenario in my opinion.
like and follow for more! 💘
UPRO Short Term Bearish Call SpreadShort term call spread back to the support at 111.00, 1 week trade to take advantage of time decay and price movement
UPRO or SPY long trade seams to workin the past trading TQQQ or UPRO long after a -83 or lower value on the Percent R indicator was very profitable.
Rules are to trail the stop at the low or prior day.
What is a bit risky is to open the trade at the 9.30 am opening, so waiting for a small dip and then entering the trade will be less risky...
VTI/UPRO LongSeems as good a time as any to jump in again, but maybe it'll drop more.
Price is near bottom 2 STD on our linear regression that started March last year (coefficient of over .95!)
Also worth noticing: there seems to be divergence with price bottoms compared to the MACD indicator.
UPRO Long Swing- Are we heading back upEntered swing trade on UPRO today:
UY signal for UPRO last Friday, with a nice dip intraday to provide a buying opportunity. Weak closed but finished with a BUY sign.
SELL on first red heiken ashi candle.
TP1 @ 3%/$88.31 (25% of position)
TP2 @ 5%/$90.23 (25% of position)
TP3 @ 7%/$91.95 (25% of position)
Strategy Statistics from backtest since UPRO conception (no take profits)
Win%: 56.7%
Avg Win: 4.79%
Avg Loss: 3.16%
R:R: 1.52
UPRO Long Swing TradeBUY signal for UPRO last Friday, with a nice dip intraday to provide a buying opportunity. Weak closed but finished with a BUY sign.
SELL on first red heiken ashi candle.
TP1 is about 3% or $89.68, where I'll take of 25% of the position if that is hit.
TP2 @ 5%/$91.42 (25% of position)
TP3 @ 7%/$93.16 (25% of position)
Strategy Statistics from backtest since UPRO conception (no take profits)
Win%: 56.7%
Avg Win: 4.79%
Avg Loss: 3.16%
R:R: 1.52
WIGGLE ROOM SO HERE I AM TRYING TO DECIDE IF I SHOULD TIGHTEN UP MY 45 DEGREE ANGLE A BIT MORE OR IF I SHOULD ALLOW A LITTLE WIGGLE ROOM
UPRO - Wave 3 Soon?It makes no sense given the economy, but the chart is saying we could be starting Wave 2 soon with a Huge wave 3 to come.
I'd love to hear everyone else's thoughts. I can't get my mind around a ride up as the economy goes down.
*NOT FINANCIAL ADVICE - NOT A FINANCIAL ADVISOR*
Momentum is weak but still heading up in the S&P500We have remained bullish and stayed in trade based on the 9-13-9 MACD (top MACD at bottom of chart). First take profit target is for 10% of position at a 4% gain.
1st Take Profit Target- 10% of position at 4% gain - 74.03
2nd Take Profit Target - 50% of position at 8% gain - 76.87
Let remaining position ride until sell signal
Trailing Stop at 6%
UPRO - Bigger View - Down to Fib .236 / $55On shorter timelines there is upside, I hope. Backing out until I could see a clear pattern, on the daily timeline looks like we're on the start of leg C down after a nice 5 Wave up
A .236 retracement would have us bounce around $55.43
Sadly, I did my long term homework after the fact and missed the peak. Expecting to get SL'ed out and lose on a long UPRO position.
Pundits all shouting Bull, and I bit post election, but that's not what the trends show me. The numbers say S&P500 down for a bit (About 6% SPX/18% UPRO).
*NOT FINANCIAL ADVICE - NOT A FINANCIAL ADVISOR*
sandp500The index, as I said, has entered a downtrend and we have a further decline with Biden's victory
SP500 Up, UPRO Up - Leg2 Elliott Wave, Bigger B CorrectionOverall I think we're on Leg B of a market correction in the bigger picture.
But in the short run, it looks like we're on Leg 2 of an Elliot Wave up for UPRO on the S&P overall, expecting a 6-10% rise, then a precipitous drop .
Prediction - UPRO dropping to between 58.91-59.73 with arise to between 64.5-70.08 (short run)
New to this platform, would welcome feedback. First time publishing, hoping the graphic comes through.
I expect money to flow out of NASDAQ into the S&P as the tech pullback continues.
*NOT FINANCIAL ADVICE - Just speculation - Discussion Purposes Only*
