It’s been a month since I published Darwin’s Inverse Leveraged Short ETF Strategy and the results are astounding. In short (no pun intended), since leveraged ETFs lose value over time due to the simple, yet deceptive properties of daily rebalancing, by shorting opposing leveraged ETF pairs simultaneously, in most markets (MOST), you make money by shorting these depreciating assets to the tune of 11%-50% annualized, depending on what the market is doing. The strategy requires some maintenance in the case of a runaway market like the 65% from the bottom we saw in the 9 months following the March 2009 lows.
To recap, here was the table I shared in January with my actual trading account results showing annualized returns of anywhere from 11%-53% depending on the particular ETF pair (full list of all leveraged ETFs ). These returns were presented in a conservative fashion, by accounting for distributions for short dividends payments, distributions, etc.
YTD Hypothetical Scenario: 12% – 30% Annualized
For the month of February, I’d like to share how these trades held up in the YTD period for about 2 months’ perspective, and also, share some new short positions I just initiated.
Here’s a chart with the YTD performance of these same short pairs positions:
They’re all net losers YTD. That’s good. Because I’m short. To put into perspective what a couple % here and there means each month, I’ve put these YTD returns into the same format I had in my initial short leveraged ETF pair article. See below:
New Short Positions
Additionally, due to a combination of which shares were available for shorting last week combined with a desire to mix of my asset classes, I also entered into new short paired positions for the following:
(CZI) – Direxion Daily China Bear 3x Shares ETF
(CZM) – Direxion Daily China Bear 3x Shares ETF
(AGQ) – ProShares Ultra Silver
(ZSL) – ProShares UltraShort Silver
(TYH) – Direxion Daily Tech Bull 3x Shs
(TYP) – Direxion Daily Tech Bear 3x Shs
In doing so, now I have a mix of commodities, countries and sectors. I had initially considered adding a Currency short pair to the mix (if I could find the shares), but the volatility wasn’t high enough to justify the effort and margin requirements. Even when factoring in the weak dollar trend we’ve seen recent history with the subsequent rebound, the annualized gain over most periods is roughly flat to high single digits. I’m focusing my efforts on a mix of diverse/volatile sectors to optimally exploit this phenomena.
I’m going to continue to update on my returns and trades monthly so be sure to Subscribe Here for Free for future updates and also be sure to check out my other project, the ETFBase for new ETF launches, new strategies and market-beating ETFs.
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