I spend so much time trying to find the right growth stock that will outperform the market. Now that we have the extreme ultra (3x) ETF’s it may be preferable to trade them. An ultra ETF is a basket of leveraged stocks or futures that attempts to outperform the relevant index. Since I like to trade tech stocks, I focus on the NASDAQ 100 index, which escaped some of the carnage last year because it contains no financial stocks.
I could simply buy the QQQQ ETF when I think the market is in an up-trend. In this way, I do not have to pick individual stocks but am invested in the 100 stocks in the NASDAQ 100 index. Lately, stocks tend to explode or implode when earnings are announced. Because the QQQQ represents 100 stocks, there is less impact from individual earnings announcements. If I want to place a leveraged bet on the QQQQ I can even trade options on that ETF.
Enter the Ultra QQQQ ETF, QLD which attempts to double (2X) the bullish performance of the QQQQ. While there is no 3X ETF for the QQQQ, there is a bullish tech 3X tech ETF, TYH. (There are also analogous bearish ETF’s for those betting on a decline in these stocks, which I will not discuss today.) Keep in mind that since these ultra ETF’s are leveraged securities, they can move more quickly in both directions–up or down.
So, if I am betting on an up-trend I could buy any one of these ETF’s to make money as tech stocks go up. The table below compares how one would have done by buying each of these ETF’s during the rally that began after 7/14 through 8/21.