/biz/ - Business & Finance

>>56978276
You should look at the volatility of the underlying asset before applying daily leverage. SP 500 can optimally take on 3x. SPY mean implied volatility over past 180 days is 14. QQQ can optimally run 2x leverage. It's mean IV is 18. The mean IV for SOXX is even higher than QQQ, at 26. The higher the volatility of the underyling asset, the less daily leverage you should use. I'd guess that the optimal daily leverage is between 1.5x to 2x leverage for semiconductors. USD is probably a safer long term hold. In fact USD has actually outperformed SOXL over the past 5 years.

>>56585841
Research "leverage for the long run" and "the long term behavior of leveraged ETFs." Basically you buy UPRO above 200 MA, and sell below. But you'll be trading multiple times per year on average and will be hit by short term and long term gains. SPY can hypothetically be leveraged 3x optimally, with QQQ at 2x. You can also do calculations based on average/median IV (and historic backtesting) to find optimal leverage amounts. That being said, 1.5x to 2x leverage with SPY (that ETF specifically because of liquidity) is preferred for long term growth (Assuming you're using LEAPS at furthest expiration date and a DCA strategy) The deep ITM LEAPS have low extrinsic value and give you better leverage long term, than the daily volatility drag LETFs.

>>55488435
I think I explained this to /smg/mechanic a couple weeks ago. Pic related shows that SPY can take 3x daily leverage long term, and QQQ can do 2x. Why are they different? QQQ normally has higher volatility (you can look at IV, HV, standard deviation etc). It gets hurt more due to volatility drag. Current SPY implied volatility is 16, QQQ is 21, and SOXX is 29. So at best SOXX can take 2x daily leverage long term. That said, a 200 MA strategy or something similar might be effective. But I would stick with options for leverage

>>55402377
I'm not getting into semantics about volatility drag, SEC shennanigans, 200 MA strategy, or liquidation during long term draw downs. With daily leverage the SP 500 can handle 3x leverage. QQQ is 2x. So you need to figure out normal volatility ranges and standard deviations. Current SPY implied volatility is 14, QQQ is 19. SOXX is 27. Just off of that eye test alone I doubt it can handle 3x long term. Volatility for the underlying (SOXX) is higher than the basic bitch indexes.