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0 pointsmodule00009y ago0 comments

For what it's worth, my best passive income was from investing as much of my income as I can part with paycheck to paycheck. No boring investments though, always the exact same two funds: UWTI and DWTI, both of which are gone, they delisted on Dec 8th.

That said...there are many funds like them, those in particular are 3x leveraged crude oil ETF's. That means if the price of oil rises 1%, UWTI rises 3%. If it falls 1%, DWTI rises 3%. Crude oil as a market has "predictable volatility", that (simply) means that within a given day, the price will rise/fall repeatedly within a sane range(given no extraordinary circumstances). Identify this range, and buy and sell on both sides(short and long) to take advantage of the range. Follow the big money(banks), and you'll be just fine. Never go against the flow, you will (virtually) always lose.

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Rodfarva9y ago

This is very bad advice. 3x funds are not meant for long term buy an hold. They experience contango and even if they index end up flat you can still lose money from the gyrations of the market. Nobody should b investing in in leveraged etf longer than a few days.

module0000OP9y ago

I didn't say to buy and hold it...that would be very foolish unless you know something that noone else does(which is unlikely). I was talking about using the daily volatility to profit from following the banks. ie: day trading. My positions in leveraged funds last less than 60 minutes, and the average is probably closer to 10 minutes.

Before you jump into 2x or 3x, you should be able to reliably generate returns from a non-leveraged ETF tracking the same commodity.

amag9y ago

So what happens to UWTI when the price of oil falls 1% and to DWTI when it rises 1%?

gaurav-gupta9y ago

They'll move 3x. When oil falls 1%, UWTI rises 3% and DWTI falls 3%. That's good for a short term bet if it goes your way. In the long term it corrodes the value.

Lets say UWTI is trading at 100 today. Oil is trading at 50.

Day1: Oil falls 47.5 (5% drop). UWTI will fall to -> 100 * ( 1 - 3 * 0.05) = 85

Day2: Oil rises back to 50 (5.26 % rise). UWTI will rise to -> 85 (1+ 3 * 0.0526) = 98.42

So even though oil price recovered, you lost $1.58. Over a period of time, rise and fall in oil prices corrodes the value of UWTI & DWTI (and similar leveraged ETFs)

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