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Varriee : may I know what are the disadvantages of holding ETF stocks overnight and not selling on the same day, given the fact if I estimate the certain stock to have good potentials ?
Moomoo Research OP Varriee : Sure. Holding an ETF overnight increases your exposure to market risks for a longer period. If you believe in the long-term potential of the ETF, this might be acceptable, but it does increase the likelihood of experiencing short-term losses.
Leveraged and inverse ETFs are based on the daily performance of the stock price.The daily rebalancing and effects of compounding may cause returns to diverge quite substantially from the performance of the underlying stock, especially if these products are held over multiple days or more, leading to more decay and underperformance compared to expectations.
Southgate : Actually I’m also new to leveraged and inverse ETFs.
May I know where the decay and underperformance is channel to? Is it calculated and reflected into the stock price?
104867332 : Will this etf has any expiry date?
152398743 Southgate : It's reflected in not exactly performing to NVDA X 2 or NVDA X -2, and they claim it's balanced at the end of the day.
The truth is, because any market inefficiency (discrepancy between the underlying and the ETF) will be corrected by arbitrage trading bots at big hedge funds / market makers, these ETFs don't really need to "do" a lot, to ensure the value is pegged in real-time and it's my understanding that so long as nothing extraordinary happens, these are just a placeholder that for the most part is kept accurate by consensus trades based on the underlying asset. I'm sure that they need to hold some convertible notes or other simultaneous long / short position thing to meet their obligations to balance it at the end of the day, but the vast majority of the money for doing this comes from the consensus trades of the market. Theoretically, this means that at least in the immediate (real time) domain, they could be manipulated if someone big enough wanted to, but I've never seen it happen to any significant degree.
For NVDA, $GraniteShares 2x Long NVDA Daily ETF (NVDL.US)$ is a LOT better than $Direxion Daily NVDA Bull 2X Shares (NVDU.US)$, since the latter doesn't have enough liquidity for this natural rebalancing to happen fast enough, and often gets a bit "out of sync" with the underlying stock.