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Shorting SOXL SMH Semiconductors

SOXL (3x bullish semiconductor etf) will be added as an Active Short Trade around current levels (trading at 27.34 as I type). SOXL is my preferred trading vehicle for this trade as if the trade plays out as expected, the semis should start the next leg down soon for a multi-week to multi-month swing trade. If so, this trade should benefit from the drop in the semiconductor sector in addition to the price decay suffered over time by leveraged etfs (click here to for a detailed explanation). The current price targets on SOXL are T1 at 23.44 & T2 at 18,14 with a maximum suggested stop on any move over 31.00 (lower, if only targeting T1).

 

Although I have provided a 4-year, 2-day period chart of SOXL with price targets, those targets may be revised based on the charts of SMH & the $SOXX (PHLX Semiconductor Index). Targets have also been listed on this 2-day period chart of SMH, for those preferring to short this 1x long etf.

While SOXL tracks the $SOXX, SMH tracks the MarketVectors US Listed Semiconductor 25 Index, hence, the slight variation in the charts between the $SOXX and SMH (and of course, the SOXL chart is distorted due to the price decay over time & as such, won't mirror the chart of the $SOXX over time). Shorting SOXL will also provide a partial hedge to my AMD long trade, which I added to on the break above 2.06 shortly after that previous update on AMD.

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Oct 21, 2015 12:38pm|Categories: Completed Trades - Short|Tags: , |6 Comments

6 Comments

  1. baller October 21, 2015 12:51 pm at 12:51 pm

    I was filled at $27.41.

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  2. Cantrip October 21, 2015 1:11 pm at 1:11 pm

    Using SOXS in IRA…

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  3. rsotc October 21, 2015 1:32 pm at 1:32 pm

    Cantrip- I’ll often use the 3x etfs in my IRAs to trade a sector although if I expect the trade to last weeks or months, I’ll try to cover & often reverse (i.e.- micro-manage the trade) at the support/resistance levels and/or my various price targets along the way. This helps minimize the price decay, especially when the 3x is moving against your position or even just trading sideways for an extended period of time. SSG (2x short semi ETF) is another option with a little less decay over time due to the smaller amount of leverage. One potential plus for SOXS is that if the market is where I think it is, we’re about to start the next big leg down which is likely to be almost a straight shot down… the ideal scenario for holding a 3x inverse ETF. G-luck on the trade!

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  4. davenchop October 21, 2015 2:02 pm at 2:02 pm

    not allowed to short soxl at ameritrade… anyone else have this problem

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  5. rsotc October 21, 2015 2:36 pm at 2:36 pm

    @davenchop Not uncommon for brokers to not have the shares of many of the leveraged etfs, especially some of the less popular/activity trades etfs such as SOXL. A broker must have the shares available to lend you from the margin accounts of other clients they have… or they must go out and borrow them from another broker to lend to you to short. Interactive Brokers has always had the best availability of HTB (hard-to-borrow) shares,stocks & etfs alike, by far, from the various brokers that I use. IB & Fidelity both have shares of SOXL available to short today although Fidelity usually doesn’t have many of the HTB shares available. You can always call Ameritrade & ask if they can locate some shares for you. Most brokers will typically charge a small premium (annual rate) while you hold the HTB shares & they can also call them in anytime, with little to no warning if they no longer have the shares to lend to you & can’t locate anymore.

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