3X ETF Strategy using UPRO and TMF : 484.5 % return

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DISCLOSURE : This post is purely for educational purposes ONLY ! Do not risk real capital on this strategy. Again, purely for education purpose ONLY !

Strategy :

This strategy is very simple. We invest in 50 % in S&P 500             ,and 50% in 20 years treasury. Now to maximize return, we are going to invest in 3X leverage ETFs, UPRO             ;Proshares UltraPro S&P500             , and TMF             ; Direxion shares trust 20 years Treasury. We will re-balance the portfolio at the beginning of each quarter( if necessary..see rules)

Rules :

1. Invest ONLY if SPY             is above 200 ma
2. 50 % in UPRO/ 50 % in TMF            
3. Rebalance portfolio at the beginning of each quarter IF SPY             > 200 ma
4. Close all positions if SPY             < 200 ma at month's end.

Back testing Results :

Note: These ETF were made available only as of June 2010. The markets has been in a bull market since 2009, so results are really bias.

2009 : 25.7 % vs 22.3 % for SPY            
2010: 44.5 % vs 15.1%
2011: 65.7 % vs 1.90 %
2012: 30.3 % vs 16.0 %
2013: 21.7 % vs 32.3 %
2014: 22.5 % vs 3.5 %

So far Q2 , 2014, the system is up 8.3% vs 1.1 % for the SPY             .

Volatility : 23 % vs 16.4 % , That is very high
Max DD             : 20.69 % vs 18.61 %

CAGR : 484.5 % vs 127.7 % ( from June 2009 till yesterday close)

I will update this post on a monthly basis. Again, this is PURELY for educational purposes only! , cannot stress that enough.


May finished with 7.7 % return. :)
but what about before the financial crisis ? If it's just useful in bull markets what is the interest in the strategy ?
+1 Reply
Algokid AlexandreFF
"Note: These ETF were made available only as of June 2010. The markets has been in a bull market since 2009, so results are really bias."

Dunno how this will perfom in a bear market. As per the rule 1 , we should be in this strategy only when the market is in a up trend, BUT, technically , the performance should still be acceptable in a bear market , as we expect TMF ( 20 yr treasuries) , to outperform UPRO. We shall see in the next bear market ( whenever that 's coming) I will compare this strategy to one where we are invested at all times, no matter of market conditions
Nice going. Do you think you can follow this methodology with real money?
Algokid timwest
Thanks Tim ! Perhaps with 1 X ETF such as SPY/TLT, one could use this strategy but I don't think we ' ll have the same returns. I will do some testing with SPY & TLT and post the result later tonight.
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