Hello. Just wondering is it worth taking a look at SUK2? Or what should you look at there?
I understand that it is a twice leveraged ETF and so if the market goes up and you have £100=00 in it you make £200=00
and if the market goes down you lose £200=00.
Or there may be something incorrect in this understanding so please do correct.
What are the factors one looks at when considering these types of instruments?
£SUK2 is a short, so it’s the opposite from what you are saying. If the market falls 1% in a day, it should go up 2%. But if it falls 10% over a week it may not go up 20%. If you invest £100 it won’t go up to £200 unless the market falls by least 50%, you won’t lose £200 if you only have £100 invested.
The SUK2 means it will move twice as much as the FTSE100 in the opposite direction. So if the FTSE is down 1% the SUK2 could be up 2% approximately.
I understand the longer you hold it the less it returns than the expected 2 X gain due to charges and a wierd inverted gain calculation.
Michael Taylor did a write up a while ago, but it is way beyond my investment competence....
SUK2 is for day traders really. The way compounding works means the return aren't exactly the same as the benchmark and it's possible to lose money in a flat market. I'd stick with a spreadbet - with or without leverage.
