Mar. 24, 2020
Comment on SEC Proposed Rule #S7-24-15: I am writing this communication because I have learned that the SEC is considering regulations that could limit my ability to use Leveraged and Inverse funds. I have been using double and triple leveraged long and inverse instruments for as long as they have been available (13+ years I estimate) and I understand their tactical nature and risk. Although I have used them as overnight trades I am now utilizing them as day trade instruments only going short and long through out the day using technical trading tools. I understand that these instruments are not intended for long term holding as price deteriorates due to the derivatives/options used to increase leverage. if holding overnight one must be aware of the risk and understand how they recalculate and adjust to NAV every day. Especially in fast markets, this price adjustment can be surprising. Currently I monitor my trades closely all day long and use close stops. In a stable trending market I may keep a "swing' trade on for a few days but will closely monitor with a wider stop fully aware that an overnight event can cause the the stop to be jumped. If I do this I monitor the futures to at least be aware of where my swing trade is. I have no intention of overnight holding of these equities in this volatile market. I have in the past bought those instruments that have weekly option availability and used a covered call strategy. Although sizable premiums are available presently (as much as 10%) I have since discontinued this practice as markets have become so volatile the risk of a direction change from a Monday to a Friday expire is too great. I am sufficiently capable of accessing the risk of these instruments and do not support the notion that my brokerage firm should have the right to decide if i should use these products. Every time I pull up a trade ticket it warns me of the risk and nature of these instruments. Fidelity, Direxion and Proshares also provide Prospectuses that describe in detail their risks. With all the information in the media, the detailed prospectuses and the warnings from my brokerage firm I can not understand how anyone would not comprehend the risk and measure it appropriately. I do not wish to become a Futures Trader and would most definitely want to continue trading funds like SPXL, SPXS, TQQQ and SQQQ as they provide the ability to produce profits. I object to this SEC action as it has the appearance of a violation of my rights as a US citizen engaged in a free market trading. The belief that a trader or investor cannot be trusted to read and understand clearly disclosed risks seems to be a huge departure from principles firmly held for other securities. But should the SEC move forward with a regulation change, my prior use of Leveraged and Inverse funds should automatically qualify me for continued use. Respectfully, John Burke