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3x ETF: bulls and bears

Bespoke notes the launch and raid growth of 3x ETF.

Many have argued that these ETFs are contributing to the volatility of the market due to their leverage. While the huge swings in these things are tempting, the losses can pile up fast with just one bad trade. For the last several months, we have learned how excess leverage has threatened the entire system. After all of this, what kind of message does it send to start creating securities that allow anyone, regardless of their investment experience, to leverage up three times with the simple click of a mouse? Before the introduction of these ETFs, the only way for an individual to increase leverage was through margin borrowing or option trading. Both of these require the brokerage to clearly highlight the potential risks and the investor to acknowledge them. Yet with these ETFs, some investors are potentially leveraging up without knowing the risks involved.

Financial: FAS bull, FAZ bear
Russell 1000: BGU bull, BGZ bear

First there was 2x, now 3x, do I hear a 5x.

Also via seeking alpha and Yahoo.


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