SSO - Time To Derisk And Optimize Your Riskier Leveraged ETF Positions
- Leveraged ETF decay costs have doubled in the last 3 months and the trend is expected to continue. But LETF leakage costs are still very low compared to March 2020.
- 2x S&P 500 SSO will leak only 1.5% per year relative to holding SPY or VOO. SSO still represents a very inexpensive form of gearing/leverage.
- However, 3x Semiconductor SOXL LETFs at current levels will lose 27% of their investment value to decay costs every year.
- Similarly, the short LETFs SQQQ and SPXU are very expensive and are expected to become a lot more expensive in market correction conditions. LETF costs will increase in multiples.
- Investors should migrate from 3x to 2x LETFS, avoid LETFs on less liquid indices other than on SPY and QQQ, and avoid short LETFs in current market conditions.
For further details see:
Time To Derisk And Optimize Your Riskier Leveraged ETF Positions