Tuesday, March 25, 2008

The Counterparty to Leveraged or Inverse ETFs

If you think you can make money by investing in leveraged ETFs, please make sure you know who your ETF's counterparty is. For example, one such ETF is the ProShares SKF, which features a 2X inverse return on financials. Sounds like a great place to invest funds if you expect the mess in the US to continue. Well, nothing is free. All these funds have counterparties, and as you know these days these counterparties may go bankrupt at any time. In fact, last week had the Fed not intervened, a like very big counterparty was supposed to go bankrupt until it was bailed out by the Fed (using future American children's money).

I asked ProShares who the counterparty to SKF is. This is their response:

"Thank you for your email today regarding ProShares. At this time, ProShares LLC does not disclose the counterparty names for the derivative products within the portfolio. Please refer to the attached prospectus for further information on the UltraShort Financials fund.


ProShares Shareholder Services"

Stumble Upon Toolbar

No comments:

Financial TV

// adding Google analytics