When to Play the FAZ and When NOT to Play the FAZ

05/16/2012 | By

Inverse ETF’s are a great way to gain leverage if you are trying achieve excess return counter to the market or just trying to hedge a portfolio.  The double and triple really can give you some juice.  But how about the options?

Most ETF’s offer option plays and as you can imagine  the double and triples are like playing volatility on steroids. I am very choosy as to which one I would like to play but the one I have had the most success with is the FAZ – the triple financial bearish fund.  This will move approximately 3x the opposite of XLF (the bullish side is the FAS, which is the triple financial bullish fund).

I have found recognizable patterns in the FAZ that make for some very profitable trading.  However, if you venture into this type of trade you have to define your risk – options do this for you.  Also, you would need to withstand some volatility and be willing to accept lose a large amount (if not all of it).

Inverse ETF’s are a great way to gain leverage if you are trying achieve excess return counter to the market or just trying to hedge a portfolio.  The double and triple really can give you some juice.  But how about the options?

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Most ETF’s offer option plays and as you can imagine  the double and triples are like playing volatility on steroids. I am very choosy as to which one I would like to play but the one I have had the most success with is the FAZ – the triple financial bearish fund.  This will move approximately 3x the opposite of XLF (the bullish side is the FAS, which is the triple financial bullish fund).

I have found recognizable patterns in the FAZ that make for some very profitable trading.  However, if you venture into this type of trade you have to define your risk – options do this for you.  Also, you would need to withstand some volatility and be willing to accept lose a large amount (if not all of it).

 

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Category: Education

About the Author ()

Bob Lang has been a private trader in equity and option markets for several years and manages separate accounts via Aztec Capital LLC. He has managed a $300 million pension and 401(k) plan for a Southern California cooperative. In early 2000, Lang started a hedge fund for private and institutional clients. This fund, Aztec Partners, was a top-performing fund that year relative to its peer group. In 2002, Lang worked with floor traders in the active bond-trading group of Countrywide Capital Markets. In May 2011, Lang launched an options trading service called Explosive Options.

Comments (1)

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  1. Tom Power says:
    05/18/2012 at 1:25 AM

    Missed the whole move here Bob, was wondering about the williams %R that price headley used to use although I know u're an old fashioned indicator guy.

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