I recognize I’ve been a little more quiet than usual on the blog. I’ve been spending some of my “blog time” on developing a new trading system, which I will soon be sharing some details about. Specifically, it’s designed for trading Leveraged ETFs.
Leveraged ETFs are a relatively new idea. They came on the scene about 4 years ago, and have expanded ever since. These funds allow investors to have some of the benefits of ETFs, like broad diversification, while also achieving a magnified return. Most of the high volume Leveraged ETFs seek to return double or triple the underlying ETF index. For example, while SPY seeks to equal the returns of the SP500, SSO attempts to double that return.
I have liked the idea of a trading system based on ETFs for a long time. But every system I’ve worked on indicates very stodgy returns compared to systems based on individual stocks. The logical solution was to work with options, but that also seemed challenging, mainly because of the difficulty in placing limit orders, and the results were poor.
About two years ago I started playing around with systems based on Leveraged ETFs. At the time it looked promising, but they were still relatively new, and many traded extremely low volume. I’m convinced they are here to stay and now trade huge volumes in the most popular vehicles. I’ve dusted off the system, given it a substantial tune up, and am ready to incorporate it into some trading models. In upcoming posts I will share some of the backtested results.
Good Trading…
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