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I'm new to the world of leveraged ETFs and not sure what I should do. I recently bought UCO at a price of $9.33. Over a course of a week is now down to about $7.15. I know the overall understanding is not to hold leveraged ETFs long-term, but its only a matter of time before oil prices start to rise again (at least from my analysis).
Should I hold onto UCO for the longer term or take a loss and invest in something like Haliburton or BP?
Every up and down maneuver (bringing the value of a non-leveraged ETF to its original value) will result in a net loss on the leveraged ETF, regardless of whether it is inverse or not. That's why leveraged ETFs are risky. You are better off cutting your losses now. The only way your leveraged ETF will recover its original value is if there is a sudden sustained spurt in oil prices, which I don't see happening.
Every volatility fluctuation eats away at a leveraged ETF.
Another point to consider with leveraged ETN's/ETF's is contango/decay that is why these are short term trading vehicles. When purchasing these products you want to have stops in place. A personal story I recently bed wrong on the direction of NatGas and got killed in premarket where I lost a point beyond my stop. Just be diligent, this not a set and forget it.
I personally would sell UCO. I owned it last month for just a couple days hoping for a short term pop that never came. I sold it as a push (basically made enough money to pay my trading costs). I bought it around $11 with a stop order around $10.25, but didn't wait for the stop to be executed. I got out the minute it didn't have the desired short term effect I was seeking.
It would basically take a huge upward move for you to just break even on UCO. Your downward risk is much higher than the potential for upward rise. You should cut your losses and run.
I bought early last week at $8.26 and I'm holding. I'm either going down with the ship or will be rewarded for patience.
Oil will go back up, just breathe and enjoy the ride.
As Lowexpectations mentioned, leveraged ETFs don't work that way. They do not reward patience due to beta-slippage (or decay). Read about it. They are purely designed for short term trades only.
If you want to own the commodity long term, I would pick a nonleveraged ETF.
As Lowexpectations mentioned, leveraged ETFs don't work that way. They do not reward patience due to beta-slippage (or decay). Read about it. They are purely designed for short term trades only.
If you want to own the commodity long term, I would pick a nonleveraged ETF.
Never buy a Leveraged ETF unless you're ready to and able to make it through losing your entire principal you invested in it.
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