http://www.oexoptions.com/BlueChip/BCO-Subscribe.html
Our Preferred Blue Chip subscribers received this information some time ago. We often publish "excerpts" of our subscriber newsletters to help the trader understand the market.
Let's start with a study of what triple leverage ETF holders are, and what they are intended to be.
Study: http://www.direxionshares.com/index.html
At www.bluechipoptions.com we trade best in heightened volatility periods, and we use these ETF's as short term trading vehicles. Make careful note: we do NOT believe investors should buy and hold the funds.
The purpose of the following funds is simple:
BGU, BGZ, FAS, FAZ.
Both BGU and BGZ trade 3X bull or bear markets respectively, and FAS and FAZ trade 3x the Russell Index.
Dirextion, and many other trading firms, new to this largely unregulated (sound familiar) and "gotta really follow the holdings" methodology could make the average investor simply think:
"Heck, when the market is going up I buy X, and going down I buy Y and I'll get rich".
It should be noted that Inverse 2 and 3X funds are massively risk for any volatility in the market and a purchase can lose 50% of it's value in minutes if the market moves dramatically in a contradictory manner to which the trader is using the vehicle.
The bottom line: We trade "front month" options only on the 3X funds. We buy calls or puts, noting that if a bear fund you are buying CALLS as options, and if a bull fun you are buying PUTS as options.
The risk is huge, and larger second buys often have to be made. But, returns can run 100's of %s on any high volatility move to the directional bias you are following, from our Dow projections.
We update often on our investments in this new genre. It's a new trading technique that we're experimenting with, and Floyd will keep you posted.
