I strongly oppose the idea to prevent people from trading leveraged ETFs, such as TQQQ, FNGU.
Please read the research paper "Leverage for the Long Run - A Systematic Approach to Managing Risk and Magnifying Returns in Stocks", which can be found over Internet. That paper researched data from 1928-2015, and found that: although in a max drawdown, the S&P 500 could drop -86% and a leveraged S&P 3X could even drop -99.9%, but the S&P 3X has overall annual return almost double that of S&P 500.
A leveraged one drops much faster than non-leveraged one, therefore "looks" much riskier than regular stocks. That might be the reason to prevent people from trading leveraged ones. However, that reason is not true, because a leveraged ETF consists of multiple stocks and will not disappear even in case of a couple of stocks bankrupted. In this regard, trading a leveraged ETF is safer than trading an individual stock because a stock may announce bankruptcy etc. any time.
Larry Mei Comment On Regulatory Notice 22-08
Dear Sir or Madam:
I strongly oppose the idea to prevent people from trading leveraged ETFs, such as TQQQ, FNGU.
Please read the research paper "Leverage for the Long Run - A Systematic Approach to Managing Risk and Magnifying Returns in Stocks", which can be found over Internet. That paper researched data from 1928-2015, and found that: although in a max drawdown, the S&P 500 could drop -86% and a leveraged S&P 3X could even drop -99.9%, but the S&P 3X has overall annual return almost double that of S&P 500.
A leveraged one drops much faster than non-leveraged one, therefore "looks" much riskier than regular stocks. That might be the reason to prevent people from trading leveraged ones. However, that reason is not true, because a leveraged ETF consists of multiple stocks and will not disappear even in case of a couple of stocks bankrupted. In this regard, trading a leveraged ETF is safer than trading an individual stock because a stock may announce bankruptcy etc. any time.
Regards,
Larry Mei