Hi,
First, before giving my first impressions and my opinion, I'm a new trader so I still have a lot to learn and a lot to make my mind about it. I've searched and read a lot in the past months, but still I feel like I know only 5% of what I want to know. Even though reading is good for self-education, it can't be compared to years of experience trading and that's why I wished I started a decade ago.
I must say I didn't know about TVIX, so I'm glad I discovered a new product, thanks. Actually, I knew about VIX index, but never thought of trading it. I knew about SQQQ though which is the reverse of TQQQ. I guess switching between TQQQ and SQQQ could work during these times of high volatility. I understand that TVIX is more about volatility while SQQQ is just the inverse of TQQQ, but volatility is pretty correlated with bearish markets, I suppose.
I'm trying to figure out the strategy... Let's say I bought TQQQ on November 2019 at 70$. Then, seeing the situation and with a little delay of reaction to grasp that it's truly going on a bearish trend, I could've sold TQQQ by the end of February 2020 at 90$ to stop losses and bought SQQQ at 20$ about the same day. Then maybe a stop-loss around 18$ would get me out of SQQQ by the end of March (no money made in March because of heavy volatility and high risk, not knowing what's the best option) and buying TQQQ at 50$. Now, I guess during the first week of April I wouldn't know if I should hold TQQQ or switch to SQQQ and I guess I would've taken another loss selling TQQQ at 40$ to avoid bigger losses in cases of a bearish trend. Then, I would've hold my money and maybe buy TQQQ again in mid-April at around 60$ and I guess I would still be holding it at the moment, even if this week was pretty bearish and I guess I would sell it if TQQQ were to go down to 75$.
So, let's see the P&L of this hypothetical scenario... which is an idealised scenario.
- Bought at 70$, sold at 90$ = +28%
- Bought at 20$, sold at 18$ = -10%
- Bought at 50$, sold at 40$ = -20%
- Bought at 60$, still holding at 80$, but would sell if reaching 75$ = +25%
Seems like it would achieve 15% P&L from November 2019 until now trying to be smarter than the volatility in the market.
If making the switch from SQQQ to TQQQ at 50$ seemed too risky, maybe I would've hold to my money and just buy at 60$, which would remove that -20% loss and end up with a 44% P&L.
Now let's say I just stick to TQQQ and I just hold to my money when it feels unsafe. Therefore, I also remove my switch from TQQQ to SQQQ at 20$, therefore only buying and selling TQQQ :
- Bought at 70$, sold at 90$ = +28%
- Bought back at 60%, still holding at 80$, but would sell if reaching 75$ = +25%
Seems like it would achieve 60% P&L.
Therefore, I think I would prefer playing the bull market only instead of trying to switch between bear and bull.
Now, even though this seems like a huge profit for only 8 months of hypothetical trading with only TQQQ, this scenario is still idealised.
Let's make a last scenario, trading only TQQQ again.
- Bought at 70$, sold at 90$ = +28%
- Bought back naively at 85$ at the beginning of March, thinking everything is under control with COVID and that the last drop was just a scared market and the effect of 3x QQQ
- Then, I would be crying my life from March to June as TQQQ stays below 85$
- Finally happy to see 95$ last week and still holding it thinking we are back on a good trend
- Crying this week with TQQQ below 85$ again
Seems like it would achieve the initial 28% P&L while still holding my TQQQ in the red since March and currently being on the edge of what's coming next. It also means I would've not made any profit this year so far.
Now back to TVIX. It's riding even bigger P&L
- Bought TQQQ at 70$, sold at 90$ = +28%
- Bought TVIX at 100$ at the end of February, sold at 250$ in April = +150%
- Bought at 60$, still holding at 80$, but would sell if reaching 75$ = +25%
Seems like that would achieve 300% P&L. Wow! But, what if I tried that in 2018 when it went bearish by the end of the year? I guess I would've sold around mid November to try my luck on the bear market with TVIX, thinking we're heading for a crash with high volatility, but November and December 2018 were both pretty chaotic, so I guess I would've end up losing money not really knowing what to do...
At the end, I feel like I would be gambling with TVIX and personally I don't want to take that risk even though TVIX seemed a great move for the 2020 crash.
I'm not that much into speculative bets. The more speculative is my move, the less money I invest in that buy. I'm more about being an opportunist. Take Canadian banks for example, the Big 6. I bought BMO.TO when it was in the low 60s in May. This is not a financial advice, but I'm personally pretty sure it's an easy bet on a guaranteed profit of at least 30%. It may take a year, but that would still be an annual return of 30%. If it takes longer, well I could just sell and take the current profit. I mean, even after this bloody week I'm already profitable by 15% in only a few weeks with that safe bet (in my opinion, please judge by yourself, this is not a financial advice). If the market crashes again and goes down in the 50s or lower, well I'll just have to wait longer, that's all, and maybe buy more! The Big 6 banks are not going anywhere, BMO has been there for TWO centuries and has been giving dividends for TWO centuries. If one of the Big 6 banks fails and cannot survive the COVID-19, then I think the whole Canadian economy will not survive the COVID-19... Again, this is my own opinion, I'm just a random guy who has absolutely no knowledge about how Canadian economy works, nor finances, nor banks.