tyeag--
I've been looking into just this sort of strategy and my analysis indicates
that shorting both the long and short leveraged ETFs would almost certainly make
you money over the long run and make you money almost all the time over the
short term as well.

I've posted a blog entry on thestreet.com
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=128700&t=01001041985086961848

(a fellow fools reply led me here)

I've also decided to post my excel files for anybody interested. They weren't
exactly made for public consumption, but I think if you dig around a bit you'll
be able to figure out where the numbers come from.

Basically I downloaded historical price data for URE-IYR-SRS & UYG-IYF-SKF and
looked at a few things. I created a column for how close to the 2X ratio the
leveraged funds tracked the index fund--surprisingly well overall. Next I
created the ability to analyze how well they did over different holding periods
and allowed comparison to the "theoretical" values. Just change the value in
cell A1 to set the holding period. "Theoretical" values were calculated using
exactly 2X ratios to the daily change of the underlying index fund. Again the
difference from theoretical was usually (acceptably?) small and almost always in
the same direction--down.

target=_blank>URE-IYR-SRS.xlsx
target=_blank>UYG-IYF-SKF.xlsx

tyeag--please see the Q&A, where I answer this and other questions.

Eric

So if going long it both the long and short ETF causes a big losses (instead of
breaking even as you would think), why not short both the long and short ETFs?
If someone shorted the UYG and the SKF they would be way up. Has anyone tested
this to see if it would really work?

Hey Gang--thanks for the response. I tried to answer some of the
questions/comments people had in a new piece over on realmoney.com. Thanks
again and happy holidays.

Eric

Interesting analysis. Agreed on the long term non-viability. Still, for swing
or even day trades in this volatile market I have made more money with DXD than
anything else I trade.

well my post got cut off because this site somehow dosent let certian characters
to be posted

(even though people can post random videos)

but go to stockcharts.com, then pull up a 2 year chart of IYR, SRS, URE. youll
see that investing in SRS wouldve wiped all your gains out at this point.

where as if you shorted IYR or URE, you would still be sitting pretty on nice
gains.

there is something quite odd about these and i think the average investor has no
clue what actually moves these funds.

the ultra shorts are going to go down as one of the great scams on the retail
investor. maybe even everyone. if you look at the price charts, theyre very
different than the underlying, AND, very different than the ultra longs. there
is something quite fishy about them.

i use them as trading vehicles, nothing more.

IYR
http://stockcharts.com/h-sc/ui?s=IYR

Definitely an eye opener, excellent article.

Note especially his analysis of the difference between shorting the double long
financial ETF (UYG) and buying the double-short ETF (SKF).

This guy knows what he's talking about.

you really have to watch them and understand why you want to make that move, i
dont like them for long term but for short term trends

ONLY FOR DAYTRADING :)