If you're familiar with the popular ETF QQQ, you may have heard about TQQQ and SQQQ. But what exactly is the difference between the two?
Like QQQ, these ETFs are tied to a underlying index called the NASDAQ 100, which is a collection of stocks that measures the performance of technology and telecommunications. But both TQQQ and SQQQ are leveraged positions meaning they rely on derivatives like options and swaps to amplify the price movements of the underlying index. This allows the ETFs to offer investors 3x the returns.
Here's the key difference though: TQQQ is the "bullish" position or long side that benefits when the NASDAQ 100 increases in value. SQQQ is the "bearish" position or short side that benefits when the NASDAQ 100 falls in value. So if you think technology will do well in the short term, TQQQ is the play to make. If you think technology will do poorly, SQQQ.
Two things to remember. First, because these are leveraged ETFs, if you're right, you'll earn a nice payday. But if you're wrong, that's 3x the mistake. And second, these are short-term positions only. If you hold TQQQ and SQQQ for the long-term, volatility and trading expenses will eat into your returns and severely deviate from the performance of the underlying index.
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Disclaimer:
This video contains solely my views and opinions for the purposes of education and entertainment. This is not financial advice. I am not operating in a fiduciary capacity, nor am I undermining the importance of seeking professional assistance should you feel it to be necessary.
