DXD (UltraShort DOW) Smells Funny

OK, what’s up with this?

Last month I figured it was time to pick up some shares of DXD, the UltraShort DOW30 ProShares. I expected (and still expect) the stock market to tank soon, and wanted to see some nice gains.

DXD is an “inverse ETF.” It’s supposed to go UP if the DJIA goes DOWN. As a mater of fact, it’s supposed to GO UP twice as much (percentage-wise) as the markets GO DOWN. That’s what ProShares says.

But check his out: I bought DXD first thing on Sept 21, 2008 when the DJIA was at 11,415. As of last night it was at

Buy: 8/21/2008 DJIA= 11,415, DXD=63.58
Now: 9/24/2008 DJIA=10,825, DXD=63.00

So the DJIA is down 5.4%.
DXD should be up 10.8% (5.4% x 2) or at 70.45
BUT it’s DOWN 0.9%

What gives? Where’s my missing 11.7% gain? Sure, its expense ratio is almost 1%. But that does not account for its poor performance.

Rather than spend hours researching this, I think I’m just gonna get out as soon as it goes back to break-even. Obviously, ProShares has got some kind of funny business going on.

KEEP AWAY!

◊◊◊◊ Now: Gold @ $883.40, Silver @ $13.29, USDX @ 76.86 ◊◊◊◊
◊◊◊◊ Now: DJIA 10,825.17

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2 Responses

  1. Here is ProShare’s reply to my email:

    Dear Mr. Gallup,

    Thank you for bringing this to our attention,

    ProShares declared distributions and traded ex-dividend yesterday, meaning the shares traded without the distribution amount. This impacted the trading price and Net Asset Value (NAV) for these funds. The chart below details important dates related to ProShares distributions. Please visit http://www.proshares.com and click on the Distributions” button to view fund specific details.

    ProShares 3rd Quarter 2008 Distribution

    Ex Dividend Date 9/24/2008
    Record Date 9/26/2008
    Payable Date 9/30/2008

    Sincerely,
    ProShares Shareholder Services

  2. FYI: I’ve sent an email to ProShares asking about DXD and inviting a reply here.

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