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How "safe" is ProShares Ultra Silver (AGQ)?

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How "safe" is ProShares Ultra Silver (AGQ)?

Postby rey » Sat May 04, 2013 8:10 pm

I'm looking to get into the silver market, and was looking at ProShares Ultra Silver (AGQ). It gives 2x the return of silver. I know it's not recommended to buy & hold this because of decay, but I'm fine with that, and the decay is really nominal. If I can get a 70% return from AGQ instead of a 40% return from SLV, it's still worth it for me. Worst case scenario and hypothetically, if a major silver deal defaults on silver deliveries (SLV is rumored to have more shares for silver than actual silver), how would that affect the price of AGQ? Just hypothetically, I'm not asking how likely it is... I also have some Silver bullion but don't like buying it because it's a pain if I ever want to sell it again...
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How "safe" is ProShares Ultra Silver (AGQ)?

Postby ephram » Sat May 04, 2013 8:12 pm

Do not hold any leveraged ETFs long-term as they will lose money to option decay alone.
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How "safe" is ProShares Ultra Silver (AGQ)?

Postby fitzwilliam66 » Sat May 04, 2013 8:33 pm

I never recommend 'paper silver' - ETFs will do you no good in a complete financial collapse, with governments seizing assets and banks collapsing you will be nothing but an unsecured creditor, and will be lucky to get pennies on the dollar.

Buy the physical metal, secure it yourself, tell no one.
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How "safe" is ProShares Ultra Silver (AGQ)?

Postby stefano » Sat May 04, 2013 8:47 pm

Speculation is never safe and a leveraged fund multiplies risks as well as reward. It gives 2x the return at 2x the risk. Also both SLV and AGQ are funds that track the spot rate of silver, they don't necessarily hold silver though conceivably they each have some invested in silver. They both use modern portfolio theory to construct a portfolio of equities that are statistically correlated with the spot price of silver. The rumour that SLV has more shares for silver than actual silver is an utterly ignorant statement, SLV isn't shares of silver, it's shares in a fund that holds equities (shares in companies) that are correlated with the spot rate of silver. Yes if the price of silver goes up both SLV and AGQ goes up (AGQ by twice as much) and if the price of silver goes down both goes down (AGQ by twice as much) but they are neither just holdings of silver, especially AGQ since it has twice the response of the spot rate of silver.
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How "safe" is ProShares Ultra Silver (AGQ)?

Postby vsneych » Sat May 04, 2013 9:05 pm

There is no way that SLV has more shares outstanding than it has silver. That would be blatant fraud and there is no way that a company like iShares would do that. People from the company would go to jail. No chance. Zero. Zilch.

AGQ is nothing like safe as silver is very volatile and double leveraged funds get killed by volatility without direction. Silver is a silly thing to invest your money in anyway.

I think you are reading too much internet nonsense.

Edit: I take back some of that, having read the SLV prospectus. First, there is so much BS double-speak in that prospectus that I can't exactly tell you what it says (a good reason for not buying the ETF). If someone thinks they can understand that, I can post some difficult to interpret sections. I think the prospectus says that they are holding silver so that every share owns an ounce of silver stored in a vault. Then there is some crazy stuff about who is responsible for that and it's not very clear. There is no chance that SLV holds correlated shares as John suggests.

Then I ran across this article http://seekingalpha.com/article/265085-does-ishares-slv-etf-really-hold-silver which has some good points. SLV has sure figured out how to buy and sell physical silver in enormous gobbing hunks if they are actually holding the silver.

I might go with a futures based ETF if I was going to invest in silver although check the tax consequences for your situation. It would be really cool if SLV was a fraud.
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