Here’s a good example of a boom-to-bust quick-cycle in Natural Gas 3x inverse (short) ETN DGAZ:
I’m a huge proponent that 3x inverse ETFs should be used ONLY by day-traders or extremely short-term swing traders.
Nevertheless, these are valid vehicles for quick profit if you’re experienced and aggressive.
Case in point, going into November, Natural Gas (seen as a line chart at the bottom) fell from $3.25 to $2.60.
For this roughly 25% quick decline, the 3x ETN doubled from $4.00 to $10.00 (simple math).
However, as price rallied from $2.60 to the current $3.50 level (a 35% gain), shares collapsed under $4.00.
If you were greedy with your gains, you likely watched them evaporate as the 3x fund crashed while Nat Gas surged.
So here we are underneath the prior October low at new chart lows for 2016 for this aggressive ETN.
ALWAYS do your research before trading 3x leveraged ETFs and ETNs. The gains are tempting but the losses can be devastating.
The VelocityShares 3X Inverse Natural Gas ETN linked to the S&P GSCI Natural Gas Index Excess Return (NYSE:DGAZ) shares fell $0.74 (-16.44%) to $3.76 per share in Monday afternoon trading. Year-to-date, DGAZ has fallen 71%.
This article is brought to you courtesy of AfraidToTrade.com.