Another 3x Bearish ETF Appears In Our Top-10
Happy New Year, Fellow Slopers.
I just saw a 3x bearish ETF (TZA) pop-up among the ten highest-ranking names on Portfolio Armor‘s daily ranking of optionable stocks and exchange-traded products by potential return net of hedging cost. Usually, it’s just stocks in that top-10, but the last time an ETP appeared there it was another bearish ETF, YANG. I posted about that here in November (“A Hedged Bet Against China“), and since then, YANG has gone on a decent run. Maybe something similar will happen with TZA? Just in case it goes pear-shaped, though, I’ve posted a hedge for it below. First, a quick look at how YANG has done since our November post on it.
Background On How We Calculate Our Ranking (more…)
Every trading day, Portfolio Armor ranks all of the hedgeable stocks, ETFs, and other exchange-traded products in the U.S. by its estimate of their potential return over the next six months, based on an analysis of price history and option market sentiment. Then it subtracts hedging costs, and ranks them all by potential return net of hedging costs, or net potential return. It’s a method of security selection we backtested 25,412 times over an 11-year time period during which it generated solid returns, on average.
On Thursday, the highest-ranked ETF, and the 7th-ranked security overall, was the Direxion Daily FTSE China Bear 3X Shares ETF (YANG), a triple-levered bet against China, with a potential return of 13.6% over the next six months.
As of Thursday’s close, you had a shot of capturing that potential return, while limiting your downside risk to 13.6% – and getting paid to hedge – by using the optimal collar below: (more…)
Dying To See Star Wars
One of the trending hashtags on Twitter in recent weeks was #ForceForDaniel, a campaign to get an early screening of the new Star Wars movie for a dying fan, Daniel Fleetwood. Director J.J. Abrams had the film screened for the man at his home, as The Verge noted below.
It wasn’t the first time, incidentally, that Abrams accommodated a dying fan: In 2009, he gave the late Randy Pausch (of Last Lecture fame) a cameo in his Star Trek reboot.
A Boost For Disney (more…)
Our Current Number One Stock: Activision Blizzard
Activision Blizzard (ATVI), which just announced its purchase of King Digital (KING), the Dublin-based maker of the Candy Crush mobile game, currently has the highest potential return of any security in Portfolio Armor‘s universe, at 20.8%. Potential return, in our terminology, is a bullish estimate of how a security will perform over the next 6 months. Below, we’ll explain how we calculate potential return, and then we’ll show a couple of ways of hedging ATVI.
How We Calculate Potential Return (more…)
In a recent post (“If Only They Had Shares”), Tim shared this bearish chart on SolarCity (SCTY), and his lamentation about having been unable to borrow shares to short it recently.
Bullish on DUST
In a recent post (“ETF Walkabout”) Tim mentioned he was bullish on the 3x inverse gold miners ETF DUST, due to its chart indicating a quadruple bottom:
A Hedge for DUST Bulls
A Brazilian Reasons To Be Bearish
In a recent post (“A Brazilian with a Sudden Rip of the Wax”), Tim noted that Brazil ETF EWZ was in free fall. For those who haven’t been keeping up on the bad news from Brazil, the headline of this AP article from Tuesday will give you a sense of what’s been happening: “Brazil’s economy plunging; no relief in sight amid political, financial chaos”.
A Hedged Bet Against Brazil
Every trading day, Portfolio Armor ranks all of the hedgeable stocks, ETFs, and other exchange-traded products in the U.S. by its estimate of their potential return over the next six months, based on an analysis of price history and option market sentiment. Then it subtracts hedging costs, and ranks them all by potential return net of hedging costs, or net potential return. On Tuesday, the highest-ranked ETF, and the 6th-ranked security overall, was BZQ, the 2x levered bet against Brazil. Portfolio Armor calculated a potential return of 15.2% for it over the next six months.