Thursday, April 23, 2009

The Next FAS-FAZ Eclipse

While FAZ, the infamous 3X financial bear ETF, started trading in November 2008 at $120, it now trades under $10 and in the same range of its sibling FAS (the bull version), which has also lost most of its value (it started trading at $20, also last November).

A couple of weesk agot this created the first "eclipse", the point in which both bear and bull versions traded at the same price: $9.55. This was followed by another eclipse around $9.50 on the same day (April 13), and then around $9.20 three times on April 16 and April 17. The last "eclipse" was on April 17 around $9.15. Note how subsequent values are alway lower and lower.

When will the next eclipse be? With FAS currently at $7.85 and FAZ at $8.91, an "eclipse" can be easily achieved in one day, if FAS were to go up a mere 6.5% (and FAZ down 6.5%).

The next projected "eclipse" value if this were to happen tomorrow? $8.36!

The drop from the last "eclipse"? 8.6%
The drop from the first eclipse? 12.5%


(Please click to enlarge. Many thanks to miadhach on skype for providing the original chart).

Note also the black line (XLF). While XLF remained relatively stable during this period, both FAS and FAZ went down significantly.

FAS and FAZ: "instruments of mass financial descruction".

Next eclipse after 8.36? Perhaps under $1?

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1 comment:

Me XMan said...

XLF will go up only if BKX goes up and FAS will pull along while FAZ will dump. If BKX goes down then FAZ will profit.

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