The Fed has obliterated any and all past data, charting, and analytics. Throw it all out the window. 2008-2021 has been a free money bonanza. ZIRP, never ending QE, bailouts, backstopping junk bonds (ridiculous). Seems like the Fed only cares about making sure the S&P never touches its 200MA. Those Ultra ETF returns aren’t sustainable.
I have also run similar tests and came to the same conclusion that they do track the underlying satisfactorily with the advertised leverage factor. BUT...you need to be hyper proactive and sell as soon as you perceive a bear market coming. It would be psychologically devastating to live through a 90% drawdown.
Thanks for all the thoughtful replies. Just a few thoughts: Someone mentioned putting 100% of an account into a leveraged ETF as being a bad idea. I totally agree, but I never suggested that nor does it bear on the point I was making. It's true that holding a leveraged ETF until it's value reached zero would also be a poor strategy, but I never suggested that either. As a general rule, I have to assume that anyone who is seriously trying to make money would have a reasonable exit strategy. Protecting one's capital is the first and most important skill a trader must develop. The primary objections I hear to holding leveraged ETFs longer term (and they are typically referring to anything more than a few days as long term) is because the underlying structures and methods used to create the leverage are inherently "leaky", in that they cause continuous trickling losses which add up very quickly and eat up any gains obtained through leverage. My thesis is that this is demonstrably false. Virtually any time period over which a 1x ETF would have made money, a 3x ETF would have made more money. Perhaps not always a full 3x, but more is more, now isn't it?
You #2 is questionable. Because you base your TQQQ success on market timing. Well, if you have good market timing, any instrument would perform well. Your #3 is obviously wrong. There were many times QQQ makes more money than TQQQ. Check last year chart, you can find when market recover, QQQ made new high, and TQQQ fall far behind, which means when QQQ makes money, TQQQ was still losing. If you track back from 2000 to present, QQQ would make more money than TQQQ.
There is no difference btw etn and etf when it comes to liquidation or deleveraging. Just check svxy etf which reduced it's leverage by 2 when xiv was liquidated.
On 6/8/2020, QQQ made a new high,which means for the period from 2/19 2020 to 6/8/2020, QQQ made a small profit, yet TQQQ lost about 20%. Here is a simulation form 1999 to 2020, QQQ handly beat TQQQ for the most time during the past 20 years. https://www.elitetrader.com/et/threads/tqqq-vs-qqq-22-years-simulation.356593/
I am interested in getting long nat gas but don't want to buy the futures contract as it is a bit more risk than I want. So, we have a BOIL here, the 2 X nat gas fund. One way to play this is to take a half position here and the second half when we exceed the recent high. That way, I am getting "extra juice" with the leverage as the trade is moving in my direction.
It's pretty clear if one looks that it depends on what kind of a market you are in and exactly which etf it is. If it's a directionless market buying the triple etfs seems to be problematic both on picking entry/exit levels and the overnight slippage. Of course, in a clear trend, you might do well with the triples if you pick smart entry and exit points. Countering trend as some do on here just seems like a mediocre trade that can do extremely badly short term. I suspect longer term some fast moving sectors may involve some inefficiences in valuation that may help or hurt your performance. But never will it work well in your favour as a counter trend trade unless you have impeccible timing. I did badly on a double long miner etf late last year and it was obvious when I studied it after the fact that whatever they were doing internally was horrible. Exit points were difficult to play and overnight losses they seemed to hit the etf harder then they should have. It played like a thin stock where the market maker always gave you a bad price. During the same time period I was able to manage several mining stocks fine cashing in some profits and limiting losses. Lesson learned.
Liquid leveraged ETFs typically perform well when there a fairly strong trend - problem is they get clobbered in dull, choppy, sideways conditions. They are good for breakout/momentum trading - as long as price is on a run.