AGQ: A Levered Catch-Up Trade On Silver

seekingalpha03-29

ProShares Ultra Silver ETF offers leveraged exposure to silver without owning the physical asset.The AGQ ETF's performance can deviate significantly from the daily target due to compounding of daily ...

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This phenomenon, known as \"volatility decay,\" means that the fund's value is reset every day, and the effects of compounding can amplify losses or gains, depending on the market's volatility. In steadily trending markets, leveraged ETFs might outperform their expected targets because gains are compounded on gains. Conversely, in volatile markets with frequent direction changes, the losses can compound on losses, leading to returns that are significantly lower than double the performance of the index they track. The longer the holding period, the greater the impact of compounding on the ETF's performance, resulting in potential deviations from the intended 2x daily objective. Click here for more on the risks of leveraged ETFs. Details on AGQ's ETF Holdings The core holdings of the AGQ fund are a range of derivatives instruments, which include silver futures and numerous swaps on the benchmark index from various institutions. Due to its 2x leverag","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4588":"碎股","BK4550":"红杉资本持仓","SLV":"白银ETF(iShares)","PSLV":"Sprott Physical Silver Trust","SIVR":"Aberdeen Standard Physical Silver Shares ETF","AGQ":"二倍做多白银ETF(ProShares)","FDN":"First Trust Dow Jones Internet I","BK4547":"WSB热门概念","BK4585":"ETF&股票定投概念"},"translate_title":"AGQ：白银杠杆追赶交易","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AGQ":1,"PSLV":1,"SIVR":1,"SLV":1,"FDN":0.9},"content_text":"ProShares Ultra Silver ETF offers leveraged exposure to silver without owning the physical asset.The AGQ ETF's performance can deviate significantly from the daily target due to compounding of daily returns.AGQ is a trading vehicle, not a buy and hold investment, with potential for high returns but also increased risk.   enter89/iStock via Getty Images If you follow me on X, you know that for the last several weeks I've been posting \"Gold is sending a warning.\" Why? Because Gold is typically a risk-off asset that moves in advance of high volatility risk-off junctures. But what about \"poor man's Gold,\" aka Silver? I think it's got the potential to move to and break out of its own range. I know there are some hardcore Silver fans, and if you want access to a leveraged return on the metal, the ProShares Ultra Silver ETF (NYSEARCA:AGQ) is the fund for you. AGQ is an exchange-traded fund that seeks to provide investment results that correspond to twice (2x) the daily performance of the Bloomberg Silver Subindex℠. It operates by purchasing derivative contracts indexed to this benchmark but crucially does not own any of the underlying bullion. This fund presents an opportunity for investors seeking capital gains, instead of dividends, through leveraged exposure to silver. The AGQ ETF offers investors a unique investment route to gain leveraged exposure to silver without owning the physical asset. With an inception date of 1st December 2008, AGQ has a net expense ratio of 0.95%, and is more of a trading vehicle more than anything else. It's crucial to note that for any holding period other than a day, returns may be higher or lower than the Daily Target. Deviations can be significant and are influenced by factors like the size of index gains/losses and index volatility. Why? Due to the compounding of daily returns. This phenomenon, known as \"volatility decay,\" means that the fund's value is reset every day, and the effects of compounding can amplify losses or gains, depending on the market's volatility. In steadily trending markets, leveraged ETFs might outperform their expected targets because gains are compounded on gains. Conversely, in volatile markets with frequent direction changes, the losses can compound on losses, leading to returns that are significantly lower than double the performance of the index they track. The longer the holding period, the greater the impact of compounding on the ETF's performance, resulting in potential deviations from the intended 2x daily objective. Click here for more on the risks of leveraged ETFs. Details on AGQ's ETF Holdings The core holdings of the AGQ fund are a range of derivatives instruments, which include silver futures and numerous swaps on the benchmark index from various institutions. Due to its 2x leverage, the total weightings amount to 200% of net assets, with 5 holdings at the time of writing.   proshares.com Peer Comparison of AGQ When compared with other similar ETFs, such as the iShares Silver Trust ETF (SLV), abrdn Physical Silver Shares ETF (SIVR), and Sprott Physical Silver Trust (PSLV), AGQ ETF stands out due to its leverage feature. While the other ETFs provide exposure to silver, they do not offer the 2x daily performance that AGQ does. This unique feature allows investors to potentially achieve greater returns, albeit with an increased level of risk. This is why AGQ is NOT a buy and hold investment, but rather a trading vehicle. Compared to unlevered Silver funds, it has vastly underperformed because of that daily 2x reset.   stockcharts.com Pros and Cons of Trading AGQ The primary advantage of trading AGQ lies in its leveraged exposure to silver, providing potential for high returns. Furthermore, with the increasing demand for silver in various industries, particularly green energy and artificial intelligence, the prospects for silver look promising anyway, so the tailwind likely helps shorter-term traders. On the downside, the leveraged nature of AGQ can also magnify losses. The fund's performance can significantly deviate from the Daily Target for holding periods longer than a day. Additionally, investing in AGQ does not provide direct exposure to physical silver, which might be a deterrent for some. Conclusion: To Invest or Not to Invest in AGQ? AGQ offers an opportunity to gain leveraged exposure to the performance of silver, with potential for high returns. However, this comes with a higher risk level due to the fund's structure. It's crucial for investors to thoroughly understand the workings of this fund and align it with their risk tolerance and investment goals.  I think, timing wise, should Gold keep moving, Silver broadly would benefit and could breakout to new highs as a catch-up trade in the near future. If you're of the same mindset, AGQ could be a quick way to gain. Just be mindful of what happens in case Silver meanders or turns lower.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2423704125"}