Anyone who trades options on ProShares leveraged ETFs deserves to lose

Discussion in 'Options' started by Error Correction Funder, Mar 2, 2018.

  1. After what they did to their VIX products, they're dead to me.
    gkishot likes this.
  2. Welcome to ET . How did you find us?
    zdreg and gkishot like this.
  3. Thank you.

    I can't remember exactly. I've been lurking for a little bit.

    The posts here are much better than anywhere else, so I signed up.
  4. I remember what it was now.

    Good posts on taxes for mtm traders and tax avoidance in general that I found via google searches.
  5. No.

    Anyone who trades options on ProShares leveraged ETFs with leverage and/or without understanding how those products work deserves to lose.

    The simple fact is that they behaved exactly as designed. Here are The Lessons From The XIV Collapse.

    One of the guys on Reddit said “I’ve lost $4 million, 3 years worth of work, and other people’s money,” Then he continues:

    “I started with 50k from my time in the army and a small inheritance, grew it to 4 mill in 3 years of which 1.5 mill was capital I raised from investors who believed in me,” Lilkanna explained, adding that those “investors” were friends and family.

    “The amount of money I was making was ludicrous, could take out my folks and even extended family to nice dinners and stuff,” he wrote. “Was planning to get a nice apartment and car or take my parents on a holiday, but now that’s all gone.”

    When people make those kind of returns, it is pretty clear they are taking too much risk.

    Too much risk == too much leverage == position sizing too big.

    Imagine you make 10 trades. The first 8 trades make 40% each, and the last 2 trades lose 90% each.

    if you allocate 10% for each trade, your account is still up 14%. But if you allocated 50% of your account (not to mention 70-80%), your account is toast.

    This is what happened to those poor XIV traders.
    options_fanatic likes this.
  6. That's all in the game.

    I'm talking about this. They clearly are either stupid or simply don't care about their options traders.

    Not with my money. I'll never trade options on those incompetents'.
  7. Neost


    To understand how these products work, you have to go through 200+ pages long prospectus. To get all the nuances regarding so-called "acceleration events", etc. Who does that? Wast majority of people trade these instruments blindly, they see a trend and jump onboard to join the ride. The fact is, these instruments were not designed for the public in the first place...
  8. Again, not all options traders lost money. Only those who didn't know what they are doing, or used too much leverage.

    We actually made very nice gains during this event - The Incredible Winning Trade In SVXY

    But obviously people who have no clue usually tend to blame others for their failures.
    options_fanatic likes this.
  9. All option holders who held during the releveraging received a haircut.

    I'm not talking about the vol blowup. Neither did the article I linked.
  10. I'm talking about the ETFs' releveraging not the VIX spike
    #10     Mar 3, 2018