Friday, April 17, 2009

The Great FAS and FAZ Loss


Some investors were cheering this week the "eclipse" of FAS and FAZ, the infamous 3X leveraged financial ETFs by Direxion. The "eclipse" was the moment in which both ETFs would have the same nominal price. This occurred at least three times this week, on Monday, around $9.55:



(Please click on images to enlarge).

While both ETFs were at $9.55, today one is at around $9.32, the other one at $9.01, i.e, declines of 5.6% and 2.4%! Both have lost even more value this week since the "eclipse". This is clearly seen on a combined comparison chart, where one is up 18% and the other down 32%:



Keep in mind that FAZ started its life at $120, and FAS at $20! Where has all this money gone?

These ETFs have been traded for 101 days (since inception), given them an average daily loss of 2.5% and 0.8%. If these rates of decline were to continue, FAZ will be trading below $1 in 88 days, and FAS in 280 days.

The combined losses in market valuation on FAS and FAZ is a staggering $4.4B since inception:



This can be seen live at the FAZ-FAS Loss-O-Meter tracking site.


The same fund manager has recently launched four new 3X leveraged ETFs, this time for leveraged income funds. They are certainly tremendous money making vehicles for someone, but certainly not for the mom & pop investors in them.

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1 comment:

Economics Digest said...

mr. shocked, i've been following ur blog, and truly enjoyed it. keep it up.

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