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Jan 5, 2016

Leveraged exchange-traded funds—the "hot rods" of the trading world—have long drawn the ire of regulators keen on investor protection. Chris Dieterich, writing for Barrons recently, pointed out that newly proposed rules to curtail the use of derivatives in funds could eradicate the racier products in this $27 billion ETF industry.

Regulators have long worried that the nature of leveraged ETFs—which are meant to be traded intraday, not even held overnight—was too confusing for many investors, who would hold them too long, not aware of the lethal time decay of the assets being acquired.
ProShare Advisors and Direxion Shares, the two competing leveraged ETF providers, say that these funds aren’t intended to be held without close monitoring. The Securities and Exchange Commission has long contended that investors in leveraged ETFs are “confused about the performance objectives.”

Professional trader Aaron Levitt, writing on, pointed out that structured, leveraged ETFs provide an amplified return for a single day. Just one. If you have a string of great days with no major switchbacks (volatility) they work. Then they reset and provide that same amplified return for the next day. Levitt says that’s the biggest misconception ma

Many investors have about leverage ETFs. They assume that if the index is up 8% for the year, then their 2x leveraged ETF will be up 16%. That simply is not how they work--Steve and Sinclair review leverage ETFs, how they really work, and WHEN they really work.

In the Q & A segment, Steve points out two key reasons why retiring professionals are changing their approach to IRA rollovers. He then takes a look at professional trader Jared Woodard's analysis of the coming year. Important points.