Mar. 17, 2020
Comment on SEC Proposed Rule #S7-24-15: Hello, I'm writing this message because I can not understand why the SEC have endorse the new job of making every body successful in investment. When you buy leveraged ETF(x2 or x3) you have to be aware about the effect of such product (never buy or put a lot of money in a stock you don't know, it is a investor job, not SEC). For me the leveraged ETF is wayyy more safe than future contract, when you can be wipe out in a day. The sheme is like this: 1. Future 2.Leveraged ETF 3.Non-Leveraged ETF Limit the ETF to 300% return is all the SEC can do to limit the Leveraged ETF in the territory of the Future contract but to implement a rule to cap at 150% to protect investor is a way to put investor in a risky position. The same investor who loose a lot of money in a 300%, 200% ETF will do it in a 150% ETF and in a margin account. They just spend less time with their money with a 3X. Market will go down and will go up, certainly after 11 years of a bull market, some forget the market can go down.... When I want to my first loss in a leveraged ETF I studies the impact of such a derivatives, for me the loss was a great lesson, so I ask my self, if a -3% hurt, what will do a -12% ? Do I want full 3x or 50%-50% 3x-2x? These ETF is beautifull for this, nobody told you to be 100% on 3x, If you think the market will be doing well, then maybe 2.5x will be okay. If you think a recession is close you can be 1x with 3X or 2x leverage or -0.3x. Some investor forget about this, I think the rule of the SEC is to make sure this type of investor don't forget their loss, if they will make money out of a non sense investment strategy you will have a worse situation (2000 crisis?). When the market plunge the end of 2018, I take the hit with pleasure, to examinate how my portofolio was doing, if I like the up and down or not, after that I recalibrate my portofolio to my risk. It is a investor job not a the SEC When a crisis will come and if the market plunge to -60%, you will have stock who plunge 80% or more, for example "UXI" (2x Industrial)(The only one before the financial crisis I think) plunge 90% in the financial crisis and deliver 165% if you hold till 2018, where is the problem with it? The problem I see here is investor who doesn't know how to invest, they will buy TSLA (example) at 1500 and quit 4 weeks after at 250, they will be wipe out and it's a good things, if investor don't hedge themselves the SEC can do nothing about it.... Broker introduce such a wide option to get out and limit the loss and firm like ProShares have inverse ETF. And leveraged ETF have already a bad reputation and ultra low volume on some, not many people claim they become rich with it, so not many people touch it. The reel problem where the SEC have a huge work to do to ban this type of product is ETN... This is a scary derivatives. Hope the leveraged ETF will remain. Regards, Alex Cleka