Ok, if you're not familiar, there's a stock\ETF, called Direxion Daily Finan. Bear 3X ($FAZ) that inversely tracks the Russell 1000 Financial Index (RIFIN.X) with triple leverage.
So, that basically means if the RIFIN drops 1%, then FAZ goes up 3%... got it?
Well, if you can grasp that idea than here's an interesting scenario that could make you a nice profit while your 401k is getting rocked. Keep in mind, risk\reward, since whenever there's a possibility to for high profit, you also have the same possibility for high loss.
Anyway, here's a possible (yet simplified) scenario if the banks get slammed again.
Lets say you buy FAZ @ $5 & RIFIN is @ $600
-Doomsday 1: RIFIN -10%, closes at $540 & FAZ +30% @ $6.5
-Doomsday 2: RIFIN -10%, closes at $486 & FAZ +30% @ $8.5
-Doomsday 3: RIFIN -10%, closes at $437 & FAZ +30% @ $11
-Doomsday 4: RIFIN -10%, closes at $393 & FAZ +30% @ $14
-Doomsday 5: RIFIN -10%, closes at $354 & FAZ +30% @ $18
So, RIFIN is ONLY down 37% & FAZ is up 260% for the week.
The reason this looks interesting to me, is that after day 1 of the crash, you've only missed a relatively small percent of the upside and if you get in on day 2, you still would of had a chance to be up 200% by end of week. This ETF can also be used as a "Cover" if you happen to own a few bank stocks during a downturn.
Warning: This ETF is ONLY for day\swing trading, NOT for buy and hold investing. Leveraged ETFs have a decay effect over long term, so I never hold $FAZ for more than a few days\weeks and always lock in profits by using a tight stop-loss.
Good luck trading.
0 comments:
Post a Comment