Sunday, May 31, 2015

Direxion Financial Bear 3X Shares, $FAZ

On Friday, May 31, 2015, I took a short position in the Direxion Financial Bear 3X ETF, ticker symbol $FAZ (I'll use the Stocktwits nomenclature when I post a stock symbol. )  It was a standard size position, the shares were easily available to borrow from my broker. I didn't have to pay any additional fee.

$FAZ is an inverse ETF.  It is designed to reflect a negative daily move of 300% of its underlying index.

What this means is that is the aggregate index of financial stocks that it follows goes up 1% in a day, $FAZ should go DOWN 3%.  $FAS is the opposite.  It should go up when the underlying goes up, on a daily basis.

The important thing to remember is that this relationship is only designed to hold for a day.  Over time, leveraged ETFs have not maintained the relationship, and have mostly declined at a greater pace than would be expected.

The first question I always get is why short $FAZ when you can buy $FAS?  On a daily basis, they are right, it doesn't matter.  If you intend to hold for a longer than that, in my opinion, shorting $FAZ makes greater sense.

Enough explaining, let's get to the details"

5/29/15 shorted $FAZ at $11.45.  Day ending price is $11.57, so I am down already.  Darn.

I have some other positions I have already entered.  I'll work those in later posts.

How This Works

This blog is designed to accompany my stock market trading account, which mostly consists of short positions in leveraged ETFs.  I'll describe what those are as I go along.

I will post my positions, mostly as I take them, but reserve the right not to post. I don't recommend that anyone follow my moves with their own investments. I can be wrong, and even if I am right for me, I may not be right for you.

Leveraged investments are risky, they sometimes move very quickly, so small positions are best. Or ones that are held for a specific catalyst.  I intend to keep my positions for a longer period.  I have already taken on some positions.

Everything on this site is free.  My goal is to make money investing, not selling subscriptions.

It's not always possible to short some stocks.  I will only post positions that I have taken.  Your broker may not allow shorts on some things mine does, and vice versa.

Good luck.