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HNU Mistake

23781 Views 23 Replies 15 Participants Last post by  VJ99
Ok people, I will admit right off that I made a mistake a few months back and now I could use some advise on my best option.

As you are likely aware, HNU is a Horizons bull ETF on Nat gas. (2x)

When I bought I just didn't do my DD to discover it is really only for very short term trading (ie: hold for a few days or weeks max.) due to volitility of NG and ETF rebalancing yada yada...

Anyway, I bought at $29.15 and of course it is half that now so I am down about $10k ... ouch!!

My question is what to do now? I expect NG to move higher some day but will rebalancing & volitility wipe out any & all possible gains? Should I take my lumps now or hold tight for another 5-6 months in hopes of cold weather or a huricane or whatever will move gas prices up?

Can my investment go to zero?

Any help would be appreciated!
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correct me if im wrong but theres not just contago risk. Volatility also causes decay or tracking error from the math alone.

An example: Say Oil on day one rises 10% and then drops 9.1% the next day. Say you buy your 2x etf at 20$.

Day 1: 20 x (1 + 0.1 x 2) = 24
Day 2: 24 x (1 - 0.091 x 2) = 19.63

So you've lost 0.37 or 1.85% per share in tracking error alone. Obviously this is less extreme with lower volitility.

I'd imagine this would be useful for hedging. Say theres a gas report pending and you have a mix illiquid securities you can buy one of the inverse ones to esentially reduce your commodity risk and not have to sell into an illiquid market.

Other then hedging, IMO this isn't an investment but simply gambling.
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