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  • ProShares declares 1-for-4 reverse split on 16 ETFs [View news story]
    It’s apparent that a lot of the public don’t know why leveraged ETFs reverse split every 6 months. It’s because of CONTAGION. Research “ETF Contagion” and you will learn that even though they trade like stocks, they actually trade more like derivatives. Just like your option premium diminishes closer to expiration date, the leverage ETF loses value over time. You will also notice that when the normal ETF increases, the leverage ETF only goes up 2.5X, but when it falls, it drops 3X. If you look at the graph of these leveraged ETFs such as UVXY, they all start in the hundreds or thousands, and now they are in their teens or single digits. This will continue to happen with the reverse stock splits. These are great trading tools for down days like today, but will kill you if you hold longer than a week. The inverse of UVXY is XIV where you can take advantage of the reverse contagion. Please research what you are trading or else you will be another subprime victim.
    Jan 24, 2014. 02:52 PM | 2 Likes Like |Link to Comment
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