SPXL 3x S&P 500 ETF: The best of all leveraged longs (NYSEARCA: SPXL)

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This survey of widely traded exchange-traded funds (“ETFs”) with derivative holdings to move their market price by 2x or 3x the price movements of their underlying index has its primary focus on the Direction S&P 500 Bull 3x Daily ETF (NYSEARCA:SPXL).

How leveraged ETFs can expect to profit from past forecasts

Market price are be predicted every day by self-protective and disruptive actions taken by market makers (“MMs”) trading high-volume block trades for institutional investors managing their billion-dollar equity investment portfolios.

Records of market outcomes following these daily forecasts make their trends visually trackable, and their rewards and risk exposures explicit in graphical form. The images below are the results of traded forecasts, not hopeful tools for guessing what might happen later. Although there is no guarantee of the future, examples in hand are much better than assertive hypotheses without evidence.

Additionally, the results follow identical strategic disciplines across all stocks, making forecast expectations directly comparable. This way, personal preferences can be carefully tracked.

We start by comparing reward prospects and risk exposures.

Figure 1

MM coverage predictions

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(Used with permission.)

The expected rewards for these securities are the largest gains over the current market closing price, which is worth protecting short positions. Their measurement is on the horizontal green scale.

The risk dimension is that of actual price declines at their most extreme while being held in the previous pursuit of upward rewards similar to those currently seen. They are measured on the red vertical scale.

Both scales are percent change from zero to 25%. Any stock or ETF whose current risk exposure exceeds its reward outlook will be above the dotted diagonal line. The attractive buying capital gain issues are found in the down and right directions.

Our primary interest is SPXL at location [9]. A “market index” standard of reward-risk trade-offs is offered by SPY at [1]. Most attractive (to own) by this Figure 1 view can be SPXL.

Comparison of characteristics of alternative investment stocks

The Figure 1 map provides a good visual comparison of the two most important aspects of every short-term stock investment. There are other aspects of comparison that this chart sometimes doesn’t communicate well, especially when broad market outlooks like SPY’s are involved. When questions about “likelihood” are present, other comparative tables, such as Figure 2, may be helpful.

Yellow highlighting of table cells emphasizes factors important to stock valuations and SPXL stock, the most near-capital-gain potential as ranked in the column [R]. Filling pink cells indicates inadequate proportions of competitive critical performance requirements, as in [T] where [F] Risk exposure exceeds [E] Reward opportunity.

Figure 2

detailed comparative data

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The price ranges implied by the day’s trading activity are in columns [B] and [C]usually surrounding the day’s closing price [D]. They produce a measure of risk and reward that we call the Range Index [G]the percentage of forecast range B to C that falls between D and C.

Today’s G’s are used for the last 5 years of each stock’s daily forecast history [M] count and average before [L] experiences. Less than 20 G or a shorter history of M is considered statistically insufficient.

[H] indicates what percentage of L positions were profitably completed, either at prices above the range or at the market close above the next day’s entry costs of the expected closing prices. The net realization of all the L’s is shown in [I].

[I] fractions are weighted by H and 100-H in [O, P, & Q] suitably conditioned by [J] to provide a ranking of investments [R] in CAGR units of basis points per day.

Additional market perspective is provided by the more than 3,000 stocks for which price range predictions are available. They currently suggest that while the market rally is underway, it is still far from generally attractive.

On the other hand, the R column scores for SPXL and the top 20 predicted populations support the competitive ability of the lead candidate.

Recent trends in Price Interval Forecast for SPXL

picture 3

daily forecast trends

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(Used with permission.)

This is not a typical “technical analysis chart” of simple historical observations (only). Instead, it represents the Daily Market-Maker price range forecast updates implied by real-time live real capital commitments.

Its communicative value is present here through visual comparisons of the proportions of upward and downward price change expectations on each forecast date. Expectations of the market maker community, as influenced by the actions of interested and involved institutional investors.

These forecasts are typically resolved in time horizons of less than six months, and often in two months or less. This one indicates that out of the 21 previous predictions like today’s, about 19 out of 20 were profitable, made in 36 market days (7+ weeks) in a profitable manner with average gains of +22%, a rate CAGR of 306%. No promises, just fun with the story.

Conclusion

Comparison of the performance of Market Makers forecasts in the short term for Direxion Daily S&P 500 Bull 3x Stock ETF with similar predictions of other leveraged ETF securities being pursued by investor referrals, it seems clear that this ETF may be an attractive investment choice for investors pursuing short-term capital gain strategies.

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