TZA is essentially a levered short vs. the Russell 2000 Small-Caps index.
I’ve had four TZA positions documented in this substack.
The 1st was in 2023, sold for a gain of 13% in 7 months.
The 2nd, also in 2023, netted a 16% profit in just 5 weeks.
The 3rd was opened in December of 2023 at $20.62 and remains open.
The 4th and last was opened February 2024 at $19.61
As I type, 90 minutes before equities markets open on Friday April 4th, TZA trades in the pre-market session at $22.26
That’s up 13.5% from what was paid, which is not a big score but in contrast the Nasdaq is only up 3.8% since then. More relevant is the Russell 2000 which is down 9.4% over the same period, so the hedge offered significant outperformance.
It was really about insurance though, which has again come in handy. By closing the position, capital is freed to deploy when stocks settle.
Many times I’ve been unequivocal that markets would tank, most recently exactly a month ago. Whatever the news squawks now, as that tanking happens, is excuses not reasons.
Rather than reiterate all those reasons, I’ll only repeat that when speculative assets and government are priced for absolute perfection, with virtually everyone all-in and on margin, there is only room for bitter disappointment.
History repeats, and here we are.
As for open positions, I’m not worried. As a defensive measure most of the One And Done categories are empty or hedged, knowing weeks like this would occur.
There’ll be plenty of time to reassess and perhaps add to existing holdings, or deploy capital into new ideas, only if and when ideal setups are evident.
So far this year, despite all the hype, selling has been orderly with no sign of panic or capitulation. Quite the opposite. The hypervalued tech darlings and false narratives that led the charge upward are still flying at super-high valuations, not at all showing signs of a cyclical bottom.
At some point however panic will probably come, and at that point I’ll close the remaining TZA.
Excellent chart and results! Thank you for the work you do. I’ve learned so much