Enduring Short Term Pain for Long Term Gain

This post will be a little different based on the market action today.  A fairly negative day as most of my positions dropped along with the general market. The ETFs I am short are mostly Bear ETFs, so when the market goes down, they go up.  Being short costs me.

Also, because they are leveraged, they go up more, sometimes a lot more than the market goes down.  It is why it’s important to keep the positions right sized and not too correlated.

So today, I got drilled.  I lost on most of positions, with $RUSS and $UVXY getting the worst of it, offset by a gain in $NUGT, which followed the price of gold down.  Not good, but an inherent risk of the strategy. 

As long as the losses are controlled, it’s OK.  The long term strategy is still in place, and no need to abandon it after one bad day.  I can always adjust by shorting some Bull ETFs, but I prefer the Bear in most instances.

A couple reasons for that.  One, the market has an upward bias.  Companies make money, and their value generally increases over time, along with the stock price and inflation has an impact.  There is also a technical feature of these ETFs that favors the Bull side.  More on that later.

These ETFs (both sides) also decay faster if there is more volatility.  I’ll write a blog post about that someday. 

For now, don’t follow my positions blindly (look at today) and nothing is for sale here.

Here are today’s positions, no changes. 

	Close	Initial Short	Gain (Losss)
NUGT	10.21	10.47	0.26
BIS	30.08	29.75	(0.33)
TZA	9.85	9.90	0.05
VIXM	55.13	54.60	(0.53)
RUSS	36.99	30.40	(6.59)
CORN	23.34	22.68	(0.66)
FAZ	11.51	11.45	(0.06)
UVXY	42.21	40.68	(1.53)
FXP	27.54	27.58	0.04