This analysis requires the knowledge of options. These would be returns based on the buy/write option strategy (as of market close Monday July 6, 2009). To gain a better understanding of the buy/write option strategy and options in general check out my stock options trading E-Books for sale on this blog.
For this analysis I used a rather bullish approach on both the bear and the bull ETF's to gain a higher return (assuming the ETF expires above the indicated strike which is unlikely but very possible) and a lower downside protection. If using any of these ideas, you will most likely have to adjust strike price and expiration according to your opinion.
Understanding the Tables:
Strike Price: The price I chose for the ETF to close at or above at expiration in order to sell the stock (stock sold at strike price).
% Return: This is how much the position would return (less commissions) if the stock were purchased at beginning of trade and the indicated option immedietly sold, and the stock closed at or above the indicated strike price as of July 18, 2009 (option expiration).
% Protection: This is how much the stock could go down before you start losing money on the position.
| ETF | Ticker | Strike | %Return | % Protection |
| 2X Leveraged Bull ETF's | ||||
| Ultra Basic Materials ProShares | UYM | 16 | 4.6 | 4.6 |
| Ultra DJ-AIG Crude Oil ProShares | UCO | 11 | 5.9 | 5.9 |
| Ultra Dow30 ProShares | DDM | 28 | 3.6 | 2.8 |
| Ultra Financials ProShares | UYG | 4 | 11.5 | 2.2 |
| Ultra Gold ProShares | UGL | 33 | 2.3 | 2.3 |
| Ultra Industrials ProShares | UXI | 19 | 5.5 | 2.4 |
| Ultra Oil & Gas ProShares | DIG | 25 | 6.5 | 2.8 |
| Ultra QQQ ProShares | QLD | 36 | 3.2 | 3.7 |
| Ultra Real Estate ProShares | URE | 3 | 2 | 14.6 |
| Ultra Russell2000 ProShares | UWM | 18 | 4.2 | 4.9 |
| Ultra S&P500 ProShares | SSO | 25 | 3.7 | 3.2 |
| Ultra Semiconductor ProShares | USD | 20 | 5.8 | 3.2 |
| Ultra Technology ProShares | ROM | 30 | 2.3 | 4.5 |
| 2X Leveraged Bear ETF's | ||||
| UltraShort Basic Materials ProShares | SMN | 20 | 4.5 | 7.5 |
| UltraShort DJ-AIG Crude Oil ProShares | SCO | 20 | 6.4 | 5.7 |
| UltraShort Dow30 ProShares | DXD | 50 | 3.9 | 2.8 |
| UltraShort Financials ProShares | SKF | 45 | 5.7 | 4.6 |
| UltraShort Gold ProShares | GLL | 15 | 1.4 | 3.7 |
| UltraShort Industrials ProShares | SIJ | 45 | 3.5 | 4.8 |
| UltraShort Oil & Gas ProShares | DUG | 21 | 6.1 | 3.7 |
| UltraShort QQQ ProShares | QID | 34 | 4 | 3.2 |
| UltraShort Real Estate ProShares | SRS | 20 | 6.1 | 5.9 |
| UltraShort Russell2000 ProShares | TWM | 45 | 5 | 4.3 |
| UltraShort S&P500 ProShares | SDS | 59 | 5.1 | 2.9 |
| UltraShort Semiconductor ProShares | SSG | 35 | 4.1 | 6.4 |
| UltraShort Technology ProShares | REW | 40 | 2.2 | 5.9 |
| 3X Leveraged Bull ETF's | ||||
| Direxion Daily 10 Yr Trsy Bull 3X Shares | TYD | 50 | 2.2 | 1.8 |
| Direxion Daily 30 Yr Trsy Bull 3X Shares | TMF | 40 | 2.7 | 5.2 |
| Direxion Daily Devlpd Mrkts Bull 3X Shrs | DZK | 50 | 6.7 | 5 |
| Direxion Daily Energy Bull 3X Shares | ERX | 25 | 5.8 | 7.1 |
| Direxion Daily Financial Bull 3X Shares | FAS | 9 | 11.8 | 3.8 |
| Direxion Daily Large Cap Bull 3X Shares | BGU | 32 | 6.4 | 4.5 |
| Direxion Daily Small Cap Bull 3X Shares | TNA | 26 | 7.2 | 5.5 |
| Direxion Daily Technology Bull 3X Shares | TYH | 80 | 3.2 | 7.6 |
| 3X Leveraged Bear ETF's | ||||
| Direxion Daily 10 Yr Trsy Bear 3X Shares | TYO | 70 | 2.7 | 2 |
| Direxion Daily 30 Yr Trsy Bear 3X Shares | TMV | 80 | 5.8 | 3 |
| Direxion Daily Devlpd Mrkts Bear 3X Shrs | DPK | 35 | 12.9 | 7 |
| Direxion Daily Energy Bear 3X Shares | ERY | 25 | 5.9 | 7.3 |
| Direxion Daily Financial Bear 3X Shares | FAZ | 5 | 6.1 | 8.4 |
| Direxion Daily Large Cap Bear 3X Shares | BGZ | 39 | 7.8 | 4.1 |
| Direxion Daily Small Cap Bear 3X Shares | TZA | 25 | 8.2 | 5.5 |
| Direxion Daily Technology Bear 3X Shares | TYP | 22.5 | 4.9 | 5.6 |
From the list above I am most interested in: (UCO), (SCO), (SRS), (SMN), (ERX), (TNA), and (TZA). These leveraged ETF's are among some of the highest return % if called out and offer good downside protection. Many of these are the bears which is another reason I am interested in using them as my portfolio is about 80% long positions, and this will help reduce my risk.
There are many more covered call ETF strategies to profit from. If you're more conservative and want to take on less risk check out the ETF's listed in the table below. However these all receive much lower premiums than the leveraged ETF's. Compare the leveraged ETF option premiums to the option premiums on the most popular ETF's (no leverage tracks basket 1X) such as those in the table below:
| Consumer Discret Select Sector SPDR (XLY) |
| Consumer Staples Select Sector SPDR (XLP) |
| DIAMONDS Trust Series 1 (DIA) |
| Energy Select Sector SPDR (XLE) |
| Financial Select Sector SPDR (XLF) |
| Industrial Select Sector SPDR (XLI) |
| iShares Dow Jones US Energy (IYE) |
| iShares Dow Jones US Real Estate (IYR) |
| Materials Select Sector SPDR (XLB) |
| PowerShares QQQ (QQQQ) |
| SPDR Gold Shares (GLD) |
| SPDR S&P 500 (SPY) |
| SPDR S&P Metals & Mining(XME) |
| SPDR S&P Retail (XRT) |
| Technology Select Sector SPDR (XLK) |
| United States Natural Gas (UNG) |
| United States Oil (USO) |
| Utilities Select Sector SPDR(XLV) |
Any of the ETF's listed in the above table are much more safe and investor friendly, however if you are a trader and seeking premium it would be in your best interest to keep an eye on some of the leveraged ETF's mentioned in this article.
To get more information about trading options check out my E-Books.
For your convenience I have put together printable spreadsheets of both the 2X and 3X leveraged ETF's ranked from least to greatest % Return and % Downside Protection below.
2X Ranked by Return:
2X Ranked by % Downside Protection:
3X Ranked by % Return:
3X Ranked by % Downside Protection:
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