I was hoping someone can help with with a mystery -
On May 13, 2021 I invested in SQQQ at a price of 63.6.
QQQ at that time was 326.
Today (June 14, 2022), QQQ stands at 276 - 15% less than when I bought SQQQ.
I would expect SQQQ (which shorts QQQ) to be up by at least that much, if not more.
However, in practice it stands at approx the same price (63.8).
How come?
Hopefully not replying to a bot …
This is WMD when held long term. Probably illegal to buy using Indian funds as its leveraged.
Quoting from SQQQ: ProShares UltraPro Short QQQ ETF
It is paramount that investors understand SQQQ is a daily-targeted inverse ETF. ProShares designed this for short-term, high-risk, and high-reward gains in the event the Nasdaq-100 struggles. This fund is not suitable for a long-term hold; investors who buy-and-hold SQQQ find their returns badly damaged by expenses and decay.
Several key factors prevent SQQQ from serving as an acceptable core holding in an investor’s portfolio. The first is the short-term focus of the fund; it is not a buy-and-hold ETF. Another area of concern is the fund size; tiny ETFs such as SQQQ can go through wild fluctuations and are always close to closing altogether.
The share prices for SQQQ also bank on a deviation from historical market performance. The Nasdaq-100 Index does not perfectly correlate with total stock market performance, but it is certainly a cyclical index. Since the general trend of the Nasdaq is to grow over time, the long-term outlook for a 3x inverse-leveraged ETF is bleak at best.
Because they utilize margined short positions and derivatives contracts leveraged inverse ETFs experience a negative roll that erodes their value quite quickly. As a result, even in a declining market, holding such an ETF can result in losses if held too long.