Note: U.S. markets were closed on the 26th of November on account of Thanksgiving but the LSE was not.
For more information on the costs payable for this class of products, please refer to the “Cost of Products” section in our introductory article of this series.
The date range was selected to highlight two effects:
- On market holidays, the ETP levels will remain unchanged as long as the underlying’s price remains unchanged.
- The best performance of this class of products occurs when there is trend of increasing price levels in the underlying. In other words, for leveraged products, “the trend is your friend.”
For more examples on utilizing insight or market sentiment to your advantage, please refer to a previous article highlighting the utilization of either leveraged or inverse products, depending on the situation.
Benefits of Short and Leveraged ETPs
We had covered the benefits of our products in detail in our previous entry in the series: our products have mitigated risk, lower costs relative to competing products, can be purchased without a margin account, limited in loss to only the amount invested and – depending on the investor’s country – very likely to accrue enhanced tax benefits as well.
With respect to our inverse products: one aspect of keen interest among investors has been the prospect of effectively “going short” without actually “shorting”. That is, buying our -1x ETP is similar to selling a stock as far as the payoff estimates are concerned. Foregoing the hassle of covering one’s short position and maintaining margins to support said position is an undeniable advantage for the investor.
Another key benefit to purchasing S&L ETPs is the limited capital outlay. The minimum amount that can be purchased is just one share – while some brokers may even allow for the purchase of fractional shares. In this model, investors are free to invest a percentage of the total cost of one share instead of the entire amount. This facility has begun to attract a large number of investors to the marketplace who earlier felt “priced out” on account of the high values of the stocks they were interested in.
