4X ETFs soon?

I tried to read the prospectus..

http://www.direxionshares.com/pdfs/DRX_prospectus.pdf

but I can't seem to find reference to my question. Can you point me to the page that talks about that as well as the stop losses that you mentioned?

 

This is basic calculus

unless the index falls 33% INSTANTLY, a 3x inverse ETF cannot go to zero.

 

Here it is - You have to look for it in the boilerplate because it’s at the trust level and applies all ETFs in the trust, rather than written in every section of every ETF.

I’ll be happy to answer any more specific questions if you have any.

Page 5 of the PDF, page 3 of the document:

A Precautionary Note to Investors Regarding Dramatic
Index Movement. Each Bull Fund seeks daily exposure to its
target index equal to 300% of its net assets while each Bear Fund
seeks daily exposure to its target index equal to –300% of its net
assets. As a consequence, a Fund could theoretically lose an
amount greater than its net assets in the event of a movement of
its target index in excess of 33% in a direction adverse to the Fund
(meaning a decline in the value of the target index of a Bull Fund
and a gain in the value of the target index for a Bear Fund). In
such event, a Fund’s trading counterparties would suffer losses. As
consideration for agreeing to provide exposure to a Fund in light
of such risks, a Fund may have to accept certain limits on daily
gains in the event of a dramatic move in the Fund’s target index in
a direction favorable to the Fund. As a consequence, a Fund’s
portfoliomay not be responsive to indexmovements beneficial to
the Fund beyond a certain point. For example, if a Bull Fund’s
target indexwere to gain35%, theBull Fundmight be limited to
a daily gain of 90% rather 105%, which is 300% of the index
gain of 35%. Rafferty does not expect a Fund’s gains to be limited
unless the movement in the Fund’s target index exceeds 25%.
Rafferty cannot be assured of similarly limiting a Fund’s losses. In
the event of index movement which results in such a limit on
gains, including an intra-daymove, a Fund’s performance may be
inconsistent with its stated investment objective.

 

trad3r - not sure about your calc skills but if an index falls 33% instantly a 3x inverse ETF would be up 99% - you're right hard to get to $0 when you are up 99% on the day.