Subject: File No. S7-24-15
From: John Zak

March 23, 2020

The current stock market turmoil strongly underscores the necessity of having leveraged and inverse ETFs available for not only traders but also investors.

Personally coming into 2020, I was about 80% invested in US equities and looking for a 10% correction to get up to 90% invested and a 15% correction to get to 100% invested with my investment portfolio benchmark being the SP 500. My investment plan has the option of some portfolio hedging should the correction be greater than 15% to mitigate the ravages of severe bear markets (since it only takes a 17.65% gain to offset a 15% loss) and a removal of hedges once the decline is in the vicinity of 40% to try to capture the greater likelihood of expected upside potential in a slightly leveraged fashion with the option of keeping hedges on at that point depending on my assessment of market conditions.

Coming into 2020, my investments were in 3x leverage UPRO and SPXL, meaning I allocated almost 27% of my portfolios to these leveraged ETFs to achieve my overall benchmark 80% portfolio weighting and kept just over 83% cash in my portfolios earning interest and seeking to be deployed on corrections.

As you know, left to their own devices, there is beta slippage in these ETF products due to the asymmetry of losses and profits that is only enhanced further due to the use of leverage. However, in a zero commission brokerage environment this is no longer an issue for traders and investors who take the time to dynamically adjust on a daily basis as I do to maintain my benchmark exposure percentage (i.e. take some profits on up days and buy some more leverage ETF shares on down days).

Currently, since the SP market decline has exceeded the 15% correction threshold level of my investment plan, my portfolio is in hedging mode so I am even more of an active trader. I hedge my long leverage 3x ETFs with 3x inverse SPXS or SPXU. Given the current high implied volatility of options and increase in margin requirements on futures because of ongoing market turmoil, the inverse ETFs have been essential in protecting my portfolio.

Now more than ever the current market environment illustrates the necessity of maintaining the availability of leveraged and inverse ETFs for market participants without additional government imposed limitations and regulations. I am very capable of understanding these products, have utilized them with success, and they are of paramount importance to me in management of my portfolio. They allow me to maintain my benchmark portfolio allocation while keeping a significant cash reserve and have immensely helped me to navigate the current market during these unfortunate times that our country is currently undergoing.