Samwise Model Portfolios
The portfolios below are separated by launch dates. Each portfolio is entirely independent and has no bearing on any other model portfolio. We launch entirely new portfolios during each market correction as an illustrative tool for new subscribers who weren't present during...
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NVDL. I assume that we will be holding on to them more than the “warning for daily use only” that accompanies the description?
Yeah we’ll be holding them longer term. I’ve not a fan of leveraged ETFs by any stretch of the imagination. In fact, I haven’t touched one in well over a decade now. But this one is well managed at this point. It has massively outperformed during rallies and managed to lose less than 2x on down moves. So I think for a 7% position in the portfolio it’s worth the risk at this point.
We’ll be putting on some hedges pretty soon. But yeah, we’ll be holding it for a while.
Hi Sam, glad to see you’re looking into NVDL. A few questions
1. How do you gauge if an LETF is well managed?
2. Have you looked into NVDL for the $5K-$1M call spread trades? NVDL 47/52 Dec 20 bull call spread was trading around $2.3-$2.4 yesterday. NVDL $47 and $52 roughly corresponds to NVDA $110 and $115, and the NVDA 110/115 Dec 20 bull call spread was trading at $2.8. It seems that with NVDL, the 47/52 trade represents a ~110% return opportunity if NVDA closes above $115 on Dec 20, while with NVDA itself, the return opportunity is lower, around 80%. I’ve noticed this discrepancy along other NVDL vs NVDA spread strike prices as well.
So we have a full chapter covering leveraged ETFs and you can read about it here:
https://sam-weiss.com/investing-basics/inherent-leverage-6/
Answering questing #1 is really complicated. Basically, you want to look at the leveraged ETF’s daily goal and run a long-term comparison analysis to see how the ETF performs relative to its benchmark. For NVDL, what we want to see ideally is the ETF produce 2x the daily returns on the upside each day. So if Nvidia moves up 2% on the day, NVDL moves up 4%. But then we also want to see it outperform on the way down as well. That means on days when Nvidia is down 2%, we’d like to see NVDL down 3.5% or 3.8%. Something below 4%. Above 4% isn’t ideal.
So we want to see that with a lot of consistency. Then we also want to see how it performs over long stretches of time. Which I’ve done all of this for NVDL. I put a lot of time into analyzing NVDL. But I looked at the ETF over long stretches of time to see whether it produced 2x the returns over the long-term. Notice that is not NVDL’s gaol. NVDL’s objective is to produce 2x DAILY returns. But even so, NVDL ended up doing way way better than 2X on the upside during big rallies, and it lost less than 2X on sell-offs. For example, during the first 6-months of 2024, NVDL produced 558% returns when Nvidia rallied 197%. That’s a lot more than double right?
And then on the correction, NVDL lost 63% on Nvidia’s 36% sell-off. That’s also less than double. So it produced more than double the returns between January and June all-time highs (558%) and also produced less than double the percentage loss on the recent NVDA crash from $140 down to $90 a share.
That’s the major periods for this year. But you also see this on a smaller time scale as well. On each turn, NVDL has outperformed its “implied” benchmark. It has done well on its actual benchmark by producing 2x the daily returns of Nvidia. But it has also done well as a longer-term investment.
In terms of looking into bull call-spreads for NVDL for the $5k to $1M challenge, we may do that. The big thing with that strategy is capitalizing on corrections. When the market has a big 10-15% correction like we recently saw this past July – August, the next thing to usually happen is a 10-15% immediate rally.
Having done this a long time, I feel pretty confident in calling bottoms now within a pretty tight range. So that’s what we’re seeking to leverage. We’re leveraging the very high probability rally off of the correction lows.
In terms of what we buy, it will really just depend on how oversold everything happens to be. Sometimes an Apple trade might make sense. Other times a Tesla trade etc.
Not sure if we’ll do a bull call spread on NVDL specifically. As I think we can arrive at the same exact result simply buying a NVDA call-spread. But we might. It will just depend on the circumstances.
Is there a difference between NVDX and NVDL?