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ARE LEVERAGED ETF’S DANGEROUS?

3 November 2009 by Cullen Roche 1 Comment

Excellent primer on leveraged ETF’s here.  A must read for anyone who is a frequent trader of such products.  In my opinion, these products are dangerous not only for the reasons generally reported (time decay for example).  They are dangerous because it is difficult, if not impossible, to manage risk around such a volatile instrument.   Money management & position sizing are difficult in such a volatile environment.  There is a reason why casinos prefer high limits and fast action.  The volatility makes it difficult for you to manage your money.   These instruments are no different than a roulette wheel in my opinion:


Source: NERA

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Comments
  • ChickenLittle

    Highly recommend the Sept/Oct issue of Journal of Indexes article on Leveraged ETFs. Gives a good explanation as how to use leveraged ETFs

    11/03/2009 at 7:17 PM